business plan for poultry farm in nigeria

[Beginners Guide] How To Start A Successful Poultry Farm In Nigeria

Starting a poultry farming business in Nigeria can be a rewarding venture, both financially and professionally. With a growing demand for poultry products in the country, there is a significant opportunity for entrepreneurs to establish successful poultry farms.

This comprehensive guide will walk you through the essential steps and considerations to start a poultry farming business in Nigeria, from understanding the industry to scaling and expanding your operations.

How To Start Poultry Farming In Nigeria

Table of Contents

Read Also:  How To Start Bee Farming In Nigeria [Beginners Guide]

Step 1: Identifying Your Niche and Target Market

Step 2: conducting market research.

Conducting thorough market research is crucial for understanding customer preferences, demand, and pricing in the poultry industry. Identify potential buyers, such as local markets, supermarkets, restaurants, and wholesalers. Gather insights on the prevailing market prices, product quality expectations, and consumer trends.

Step 3: Developing a Business Plan

Step 4: acquiring necessary skills and knowledge.

To succeed in poultry farming , it is vital to acquire the necessary skills and knowledge. Attend training programs, workshops, or courses on poultry production, management, and health. Networking with experienced farmers and industry experts can also provide valuable insights.

Step 5: Selecting a Suitable Location

Read Also:  Top 10 Biggest Fish Farm Projects in Nigeria

Step 6: Constructing Poultry Houses and Facilities

Step 7: procuring necessary equipment and supplies.

Procure the essential equipment and supplies required for poultry farming. This includes feeders, drinkers, brooders, egg incubators, and cleaning equipment. Ensure that the equipment is of good quality and appropriate for your production scale.

Step 8: Ensuring Biosecurity Measures

Understanding the poultry farming industry in nigeria.

The poultry farming industry in Nigeria is diverse and encompasses various types of poultry production, including broiler farming, layer farming, and hatchery operations. Broilers are raised for meat production, while layers are specifically bred for egg production. Hatcheries play a crucial role in providing day-old chicks to farmers.

Potential Market and Profitability

Key challenges and considerations.

While poultry farming offers promising prospects, there are several challenges that aspiring poultry farmers need to be aware of. Some of the key considerations include:

Disease outbreaks and biosecurity:

Feed costs and availability:.

The cost and availability of poultry feed can impact profitability. Developing strategies to ensure a steady supply of affordable and nutritious feed is essential.

Market volatility and competition:

Key factors to choosing the right poultry breeds to start your farm, evaluating different breeds and their characteristics.

Read Also:  20 Common Diseases In Poultry Farm

Considering the Demand and Market Preference

Selecting breeds suitable for local conditions.

Read Also:  12 Poultry Farming Tips For Beginners [Success Guide]

Managing Poultry Health and Nutrition

Implementing vaccination and disease prevention protocols, providing balanced nutrition and feed management, monitoring and maintaining flock health.

Regularly monitor the health of your flock through visual inspections, weight checks, and behavior observation. Identify and address any signs of illness or distress promptly. Establish a relationship with a veterinarian who can provide guidance and support for flock health management.

Poultry Farming Operations and Management

Day-to-day care and feeding routines, egg production and management, broiler production and management.

If you are raising broilers, develop a production plan that includes selecting quality chicks, managing brooder temperature and lighting, and implementing a feeding and growth strategy. Monitor the growth rate, adjust feed rations accordingly, and ensure proper ventilation in broiler houses.

Proper Waste Management and Disposal

Marketing and selling poultry products, identifying potential buyers and markets, developing marketing strategies.

Develop effective marketing strategies to promote your poultry products. Utilize both online and offline channels, such as social media, websites, local advertisements, and product demonstrations. Differentiate your products by highlighting quality, health benefits, or unique selling points.

Building Partnerships and Distribution Channels

Financial planning and record-keeping, estimating startup and operational costs, tracking expenses and income.

Maintain accurate and detailed records of your expenses and income. Implement a robust record-keeping system to track feed costs, veterinary expenses, labor costs, sales revenue, and other financial transactions. Regularly review your financial statements to assess the profitability of your business.

Evaluating Profitability and Making Informed Decisions

Regulations and compliance, understanding legal requirements and permits, complying with animal welfare and food safety standards.

Maintain high standards of animal welfare and hygiene in your poultry farm . Provide adequate space, ventilation, and access to clean water and feed. Follow recommended practices for disease prevention, vaccination, and medication administration. Implement proper food safety measures during egg collection, processing, and packaging.

Scaling and Expanding Your Poultry Farming Business

Evaluating growth opportunities, increasing production capacity, diversifying product offerings.

Explore opportunities to diversify your product offerings to cater to different market segments. This can include value-added products such as processed poultry meat, specialty eggs, or organic poultry products. Conduct market research and assess the feasibility and profitability of new product lines.

Can I start a poultry farming business with limited capital?

How long does it take to start making a profit in poultry farming, what are some common challenges in the poultry farming industry.

Common challenges in the poultry farming industry include disease outbreaks, feed costs, market volatility, and competition. It is important to stay updated with industry trends, invest in disease prevention measures, and develop effective marketing strategies to overcome these challenges.

How do I ensure the health and well-being of my poultry flock?

What are the future prospects for the poultry farming industry in nigeria, how much does it cost to start up a poultry farm in nigeria.

To start up a poultry farm in Nigeria, you will have at least 500,000 to 1 million nairas.

How can I start a small poultry farm?

How much do poultry farmers make in nigeria, how many bags of feed can 500 layers consume.

For the first month, 500 layer chicks will require 750 kilograms of feed if each one consumes 1.5 kilograms of feed every month. Your chicks’ food intake will increase by about 1.75 kilograms a month over the next month.

How much does it cost to raise 100 chickens?

How can i become a successful poultry farmer, can a chicken lay 3 eggs in one day.

No, it is not possible, excerpt by chance.

How long do layers lay eggs?

How long does a baby chicken take to grow.

Breed-specific differences in how rapidly or slowly an individual chicken develops may also play a role in the timing of this stage of development.

How many eggs do layers produce per day?

What is the most common poultry disease, share this:, author: adewebs, you may also like:, goat farming in the usa: how to start goat farming in the usa, can chickens eat grapes [poultry feeding tips], [beginners guide] how to start ostrich farming in nigeria, 18 toxic plants your chickens must avoid (must read), 6 replies to “ [beginners guide] how to start a successful poultry farm in nigeria ”, leave a reply cancel reply.

Poultry Farming Guide in Nigeria: Business Plan, Breeds, Cost, Profit

Looking for a Poultry Farming Guide in Nigeria plus a business plan to go with alongside. Read this article as a poultry enthusiast or an academic to know more.

Nigerian poultry farmers raise chickens, ducks, turkeys, and other fowl for their meat and eggs. The most popular fowl grown in Nigeria is the chicken, which may be raised for both meat and eggs. The least often reared poultry in Nigeria is geese.

Chicken, turkey, duck, geese, quail, pigeons, and guinea fowl are among the main poultry species bred by poultry producers. The most popularly eaten bird in Nigeria is the chicken, making it an ideal choice for farmers who wish to profit from the country’s rising demand for poultry meat and eggs. Turkey is a close second.

You can raise ducks, quails, or pigeons if you want a market with less competition. The Nigerian climate must be taken into account while deciding what kind of bird to raise. It’s critical to select a bird that can survive the temperature in Nigeria since some species of poultry birds can not thrive in hot regions.

Selecting a suitable location for your chicken house in Nigeria

• In Nigeria, a location for a chicken farm is chosen after taking into account a number of considerations. Climate is the first component. Nigeria’s typical temperature is hot and humid, which is perfect for raising chickens. However, drought conditions can have a severe effect on poultry production in some regions of the nation.
• The second element to take into account is closeness to marketplaces. Poultry farms must be situated close to marketplaces so they may readily sell their goods. If the farm is too distant from the markets, transportation expenses will eat into the revenues.
• Land quality and availability are the third element to take into account. For housing and grazing spaces for chickens, poultry farms need a lot of land. In order to properly sustain chicken farming, the land must also be of high quality.   In Nigeria, it’s crucial to carefully take these three elements into account while choosing a location for a chicken farm. By doing this, you may maximize the likelihood of your chicken farm’s success.

Housing for poultry farming in Nigeria

The A-frame chicken coop is one common design for poultry farms in Nigeria. These coops are easy to build and may be outfitted using materials found nearby. They give your birds a safe and secure home, and they are simple to extend as your flock size increases. Use an existing structure on your property, such a shed or outhouse, as a place to house your poultry in Nigeria. If you choose this route, it’s crucial to make sure the structure is well-ventilated and well-lit. Additionally, you must cover all windows and doors with wire mesh to shield your birds from predators. Poultry Farming Guide in Nigeria Whichever kind of accommodation you decide on for your poultry farm in Nigeria, it’s crucial to keep it tidy and maintained. Maintaining your birds’ health and productivity will assist avoid the spread of sickness.

Commercial feeds are typically more expensive than meals that are made nearby, but they are also more nutrient-rich and benefit your birds’ health. Follow the manufacturer’s guidelines for feeding your birds if you choose to utilize commercial foods. Locally produced foods may be less nutrient-rich yet are frequently less expensive than commercial feeds. To locate a feed that is effective for your birds, you will need to experiment with several locally made foods. It’s crucial to provide your birds access to clean water, regardless of the type of feed you use. Water assists with digestion and keeps them hydrated. you stop the spread of disease, be sure you frequently clean and replenish water containers.

Small-scale chicken rearing in Nigeria

Poultry farming offers several chances for small-scale farmers to become engaged, from growing birds for eggs to producing meat. The decision of the sort of chicken you wish to produce is the first stage in beginning a small-scale poultry farm. The most popular breed is chicken, but you may also have turkeys, ducks, or geese. You’ll need to buy some baby chickens or other young birds once you’ve chosen the breed of poultry you wish to keep. These may be purchased online or from a nearby hatchery.

You must construct a brooding chamber for your newborn chicks after you’ve acquired them so they may stay warm and secure as they develop. A cardboard box and a heat bulb may be used to create a straightforward brooding setup. Your young chicks can be transferred to a bigger coop or enclosure after they have outgrown the brooding space. You’ll need to provide your birds food and water as they grow. Grain, vegetables, and chicken feed make up a healthy chicken diet. You may feed them by either growing it yourself or buying it from a nearby feed store. Water must always be accessible, and it should be replaced frequently.

In Nigeria, the average cost to set up a chicken farm is around N150,000. This price covers the cost of the necessary equipment, starter ingredients, and day-old baby chickens. In Nigeria, the startup expenditures for a commercial poultry farm might reach N1 million. In Nigeria, a chicken farm typically makes around N50,000 per month in profit. Selling eggs and meat at greater prices or lowering the cost of production via improved management methods are two ways to enhance profit.

Organic Poultry Farming in Nigeria

In Nigeria, there is a style of farming called organic poultry farming where hens are reared without the use of antibiotics or other growth-promoting substances. The chickens are given an organic feed and lots of room to wander and forage. Nigerian government regulations must be met in order for organic poultry growers to receive certification. These requirements include giving hens access to clean, pleasant surroundings, sunlight and fresh air, as well as a healthy feed.

Additionally, synthetic pesticides and herbicides must not be used on farms. Nigerian organic poultry farming is still in its infancy, but as more people learn about its advantages, it is becoming more and more well-liked. Because they are aware that organic chicken meat is healthier for their health and the environment, consumers are prepared to pay more attention to it. Farmers of poultry who transition to organic farming should anticipate increased income as the demand for their product rises.

Now that you have read this Poultry Farming Guide in Nigeria, are you ready to get a business plan alongside?

How To Download The Complete Chicken Farming Business Plan for Broilers and Layers In Nigeria PDF and Doc

Above is a part of the chicken farming business plan in Nigeria. In case you a complete business plan, follow the procedures to download it.

Pay the sum of  N8000 (Eight thousand naira only)   to the account detail below: Bank: GTBank Name: Oyewole Abidemi (I am putting my name and not our company account so you know I am real and you can trust me, and trace me) Ac/No: 0238933625 Type: Saving

P.S: We can also tailor  the business plan to your name,  business size, capital requirements, and more to fit your direct needs. Call or message +234 701 754 2853 for enquiries

Thereafter, send us your email address through text message to  +234 701 754 2853 .  The text must contain the title of the business plan you want and also your email address. Immediately after the confirmation of your payment, we will send the chicken farming business plan for broilers and layers in Nigeria to your email address where you can easily download it.

Thanks for reading this Poultry Farming Guide in Nigeria

Opeoluwa Falodun

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• Sun. Jun 9th, 2024

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NGBusiness Gives You Access To Over 100 Business Plan Samples As Well As Other Important Business Related Information...

Poultry Farm Business Plan in Nigeria (2024 DOC)

Poultry Farm Business Plan in Nigeria 2024 Sample

The Poultry or Chicken Farming Business Plan comes as a Feasibility Study In Nigeria or birds arming, the business plan undergoes a regular up from time to time, this is done to correspond with the prevailing economic condition of the country.

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Business plans and feasibility studies to get a discount.

The Poultry Farm Business Plan In Nigeria Feasibility study comes in form of an e-book, could be converted to word document based on demand and it offers the following content;

Poultry Farm Business Plan In Nigeria Table Of Content

Chapter One – Executive summary of the business plan on poultry farming pdf

• The business Opportunity
• The market Target
• The competition
• The competitive Strategies
• The management Team
• The financial Plan, It comes in an excel spreadsheet

PURPOSE OF THE BUSINESS PLAN

A typical proposal for raising a poultry farm in Nigeria should at least come with the purpose of starting the business and then followed by other important information.

Poultry Farm Business Plan In Nigeria Market Analysis

• Poultry farm market analysis

Poultry Farm Business Plan SWOT Analysis

• Opportunities

STRATEGIC INTENT

VALUES AND PRINCIPLES

• Project Strategies
• Financial Strategies
• Marketing Strategies
• Operational Strategies
• Human Resources Strategies

IMPLEMENTATION PLAN

• Organization Structure
• Manpower Requirements
• Manpower Plan
• Man Power Budget
• Roles And Responsibilities

Poultry Farm Business Plan In Nigeria Technical And Operational Plan

• Raw Material Requirements
• Machinery And Equipment Requirements
• Layout Of The Business Premises
• Growth Management And Quality Assurance
• Disease Control And Prevention
• Egg Production Process

MARKETING PLAN

• Location Of The Project

KEY FINANCIAL MANAGEMENT CONTROLS

• Bookkeeping And Financial Administration Requirements
• Importance Of Bookkeeping And Financial Administration
• Computerized Bookkeeping And Finance System

Poultry Farm Business Plan In Nigeria Projected financial Statement

• Assumptions
• Application Of Funds
• Operating And Maintenance Costs
• Daily EEG and Feed, Drugs Computation Analysis From Point Of Lay (POL) For 12 Months period
• Income Statement Projections
• Projected Profit And Loss For 4,000 Birds In 52 Weeks
• Market Information
• Mortality Losses
• Profit projection For 4,000 Laying Birds
• Profit Projection for 10,000 Broilers

Additional Content

• Poultry farming egg Production Management
• Broiler Management Guide
• Broiler Starter formula
• Broiler Grower formula
• Pullet grower formula
• Laying Bird feed formula
• Layout Concentration Formula
• Broiler Concentration formula

To get the full business plan on Poultry Farming Business Plan in Nigeria + Feasibility Studies PDF, pay N10,000 to  GTBank (Guaranty Trust Bank)

Account Name – Okite Joseph ikenna

Account No – 0044083736

Once payment is made for the Poultry Farming Business Plan in Nigeria + Feasibility Studies PDF, send the following (i) a valid email address and (ii) your payment details to any of these numbers – 07039768549.

What You Can Use Your Poultry Farm Business Plan in Nigeria ;

Obviously, the Poultry Farming Business Plan in Nigeria was written not only or the execution of a business, but it also has other purposes for which it was written, the poultry farming business plan in Nigeria comes as a well researched feasibility study with well detailed information on how to start up a poultry farming business and how to successfully run the business. This is a business plan for poultry production & marketing in Nigeria and it comes in a PDF format, every entrepreneur deserves to have this document for various purpose apart from just starting up a business, especially when it concerns sourcing of fund in order to either commence or to increase investment portfolio, below are the things you can use your poultry/chicken farming business plan or sample poultry business plan PDF;

BANK LOANS – Accessing a bank assistance in form of loan can be achieved using a well written business plan or feasibility study by a professional, most of these financial institutions , especially banks can be convinced that their money will be safe with you, the will have to trust you if you provide a template on how you intend making use of the loan facility issued to you. Banks are most times interested in the fact that the loan being issued will be recovered; your business plan for poultry farm will help out big time.

GRANTS – Your chicken farm business plan pdf file gives you an edge while applying for grants from different organization, especially government agencies. The possibilities of having these agencies listening to your apply application lies with the quality of your application, and this comes from the sample of the poultry business plan pdf file you will be submitting. This makes it a lot more easier and accessible, especially if done with a doc that will convince those issuing the grants.

PROPOSAL – Quality proposal goes a long way in your business proposal application. One of the factors that will make your proposal to be considered in any way is the information contained in the document. After getting our poultry farming business plan manual, applying for a proposal will become as good as complete, just as applying for loans and grant has become easy given the well detailed information contained in the business plan document.

Seminar presentation – You deserve a document that offers the best information required, so that in your presentation, you will not be caught reeling out un-found data and information. The things is that this business plan to forms the basis of your seminar presentation as well as research, however, you can as well get more information in order to compare information contained in your research work.

COMPETITIONS – Going for competition with this business plan can earn you your competition rewards, sometimes these rewards comes inform o cash prize or scholarship, or the entrepreneurs this competition where your journey in business begins. The essence is to win an trust me, the information contained in this business plan can earn you that..

POULTRY FARM BUSINESS IN NIGERIA

Today’s Nigeria accommodates some of the biggest poultry farms in Africa, despite this fact, Nigeria is still one of the largest importers of chicken. Understandably, this is a country of over 180 million people hence the need for edible birds will always be on the high.

The high demands for poultry birds is not restricted to just the festive periods or seasons like Easter, Christmas, Sallah etc. In fact a visit to Chicken market in a town as small as Abakaliki will tell you that the demand or this birds are high, virtually every market in Enugu has a potion where live chicken are sold, and the number of people trooping in too buy will amaze you. The story is not different from other small and large cities, and these are families buying for their consumption. When you factor in the fast food restaurants , the Supermarkets  the request for these for these live stock products, you will understand why the country still import these products despite the level o production.

In essence, demand has always been high than supply, and that is where the business opportunities comes in from. As an individual poultry farmer, your business stands a chance of supplying birds to families, eateries, Malls as well as big supermarkets. The truth is that the industry has become a money spinning machine and it is estimated to worth a multi billion Naira industry.

Set Backs In The Poultry farming Business

As live stocks, the poultry industry suffered huge set back, these set back resulted in the loss of some birds, the setbacks came inform o avian influenza, salmonellosis, although it was contained, it caused huge losses to some farms as demand for birds reduced, that’s is not the case anymore even though there is still the challenges of incessant power outage which also affect other businesses not just the poultry business.

Factors Responsible for The Growth O Poultry Business In Nigeria

Despite the setback and other challenges, the industry has continued to progress, meanwhile, there are factors that have contributed to the remarkable development of the poultry industry in Nigeria, these factor has continued to control how the business is done, these factors includes the following;

• The demands for eggs, poultry meat which is the primary reason or raising a poultry farm.
• The relatively profitability of the Poultry enterprise if brought into comparison with other agriculture enterprises.
• The roles as well as the contribution of the Poultry association of Nigerian, this is the umbrella body that cover all the poultry farmers in Nigerian.

To get the full business plan on Poultry Farming Business Plan in Nigeria + Feasibility Studies PDF, pay N10,000 Into GTBank (Guaranty Trust Bank)

Once payment is made for the Poultry Farm Business Plan in Nigeria + Feasibility Studies PDF, send the following (i) a valid email address and (ii) your payment details to any of these numbers – 07039768549.

Hindrances To The Growth Of Poultry farm Business In Nigeria

Without a doubt, in as much as the industry is experiencing growth and profitability, there are factors that has caused hindrances to the Poultry Business; see below;

• High cost of inputs
• Power outages
• Seasonal diseases (periodic)
• Low purchasing power etc.

Factor To Consider Before Setting Up A Poultry Farming Business

Ensure you have the following in place before setting up your poultry farming business in Nigeria;

Overview – Write a comprehensive overview of the business you want to start up, outlining every other required information needed. You should also chose a business for your Poultry Farm, other things to include are the services as well as the production of quality, then you should highlight the affordable of your poultry meat and egg. Also you should have a set of customers you get to targeting, demand for poultry farm products and services is almost the same everywhere in Nigeria.

The Company – The business should at least be structured. Who are the owners, how are you going to finance the start up, what is the name of the Poultry Farm business, will it be established as a limited liability company, who will be the owner, manager as well as investors. And then describe your products and services, this is a known secret, the likely Poultry Farm products, they poultry egg, chickens and poultry litter waste etc, now what are the services, you could chose to provide the services known as KCW and F, in plan terms Kill–‐Cut–‐Wrap–‐Freeze, most poultry farms offer these services these days. Place emphasis on the quality of your products and how hygienic your eggs and how they are of high quality. You business motto could be something like “We produce, process and package to meet Your standard”.

Capital And Start Up fund – You can’t successfully set up and run any business without at least having you capital in place, this is applicable to all kinds of business, some business minded individuals even resort to taking loans and advances, while other s hunt or grant, business proposal etc. The essence is to have fund to start up the business.

Location – When sitting a poultry farm, the location to be selected should at least be conducive to the birds, exposing the birds to extreme climatic conditions can affect their growth and development.

Equipment – You need to have the best equipment in order to survive the delicate nature of handing your chicks. Ensure that your live stock supply are healthy, and also ensure that the Hatcheries in charge o delivering a day old chicks to your farm are well scrutinized. Also engage a qualified doctor to always check and apply vaccinations or medication when needed.

Sourcing Of Heat – What the Poultry Farm Business Plan In Nigeria feasibility study teaches you is that there are sources of supplemental heat that can benefit your poultry farm, items such as the following will do the trick;

• Cooking stoves
• Lesser extent paraffin stoves
• Brooder stoves

You can place the stove on the roof or somewhere above ground level.

Feeding – With the Poultry Farm Business Plan/Feasibility Study In Nigeria, you can learn the feed technique known as forced feeding, chicks find it difficult  to feed to feed themselves, hence the need to do that yourself, at least for the first four weeks.

Types Of feed for your Poultry Farm Business Plan In Nigeria

Broiler growth and efficiency are dependent on the type of feed you give to them, there are stipulated feeds you must offer to these birds, they as follows;

• Starter feed crumbs
• The Grower feeds
• Finisher feeds

While the Grower Feeds is given to the between 14 to 16 days after the completing the Starter, you can then start administering the Broiler Finisher feeds, this is the feed that the broiler consumes most.

Other factors To Consider Includes The following;

• Brooder Guards/Rings
• Preparing For Arrival Of Chicks
• Brooder Stove Arrangement And Temperature
• Keys to Successful Brooding And Rearing

To get the full Poultry Farming Business Plan in Nigeria + Feasibility Studies PDF, pay N10,000 to

GTBank (Guaranty Trust Bank)

Once payment is made for the Poultry Farm Business Plan in Nigeria + Feasibility Studies PDF, send the following (i) a valid email address and (ii) your payment details to any of these numbers – 07039768549 .

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Note – Free Poultry Farming Business Plan In Nigeria PDF is not available on this platform!

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Poultry farming in Nigeria: Overview, requirements and cost

Introduction.

In the rich tapestry of Nigeria’s agricultural landscape, one industry stands as a beacon of opportunity and prosperity — poultry farming. This comprehensive guide is your key to unlocking the potential of a poultry farming business in Nigeria. Brace yourself for a journey into the dynamic world where innovation, sustainability, and profitability converge to redefine the poultry farming narrative.

Step by step overview of poultry farming in Nigeria 

1. The Poultry Farming Revolution: A Prosperous Pathway

Poultry farming in Nigeria is not merely a business; it’s a revolution. From providing a steady supply of eggs and meat to fostering economic growth, the potential for success in poultry farming transcends traditional boundaries.

2. Market Dynamics: Navigating Opportunities and Challenges

Embarking on a poultry farming venture necessitates a deep understanding of market dynamics. Explore the ever-growing demand for poultry products, identify potential challenges, and position your poultry business strategically in the market.

3. Setting Up Your Poultry Farm: Essential Steps for Triumph

• Selecting the Right Poultry Species: Choosing the appropriate poultry species is a pivotal decision. Delve into the characteristics of chickens, ducks, or turkeys and align your choice with market preferences and your business goals.
• Designing an Optimal Farm Layout: Create an efficient and hygienic layout for your poultry farm. Consider factors such as spacing, ventilation, and waste management to ensure the well-being of your birds.
• Implementing Robust Biosecurity Measures: Prioritize biosecurity to safeguard your flock from diseases. Develop strict protocols for hygiene, quarantine, and vaccinations to maintain a healthy poultry population.

4. Nutrition and Feeding: Sustaining Healthy Flocks

Devise a well-balanced feeding program for your poultry. Explore nutritional requirements for different stages of growth and invest in high-quality poultry feed to ensure optimal health and productivity.

5. Disease Management: Preserving Poultry Health

Proactive disease management is a cornerstone of successful poultry farming. Understand common poultry diseases in Nigeria, implement vaccination programs, and establish a partnership with a veterinarian to secure the well-being of your flock.

6. Breeding Strategies: Maximizing Productivity

Efficient breeding practices are vital for a thriving poultry farm. Explore strategies for optimal breeding, understand incubation techniques, and implement practices to enhance the reproductive efficiency of your flock.

7. Marketing Your Poultry Business: Crafting a Brand Identity

Establishing a strong brand presence is essential in the competitive poultry farming landscape. Leverage digital marketing strategies, create a professional website, and explore local partnerships to ensure your poultry business shines in the market.

8. Financial Management: Navigating the Numbers for Profitability

A flourishing poultry farm requires sound financial management. From budgeting for feed to calculating return on investment, understanding the financial aspects of poultry farming is key to long-term success.

9. Scaling Your Poultry Business: Exploring Growth Horizons

As your poultry business gains momentum, explore avenues for scaling your operations. This could include diversifying your product offerings, expanding your flock, or establishing partnerships with local businesses.

10. Challenges in Poultry Farming: Confronting Hurdles with Tenacity

Acknowledge and address challenges head-on. From disease outbreaks to market fluctuations, understanding and proactively managing challenges is crucial for sustained success in the poultry farming industry.

Starting a poultry farming business in Nigeria is an exciting venture that holds significant potential for success. However, it requires careful planning, adherence to regulations, and a clear understanding of the financial investments involved. Here’s a detailed insight into the requirements and costs associated with launching a successful poultry farming business in Nigeria, explained in a clear human tone.

Requirements and cost of starting a poultry farming business in Nigeria 

1. Land and Infrastructure:

• Requirement: Secure a piece of land with adequate space for poultry pens, feed storage, and waste disposal. Plan the layout for efficient operations, proper ventilation, and hygiene.
• Cost: Land prices vary based on location, but budgeting between ₦500,000 to ₦1,500,000 for land acquisition and initial infrastructure development is a reasonable estimate.

2. Poultry Species and Stock:

• Requirement: Choose the poultry species you want to raise, whether it’s broilers, layers, or a combination. Acquire healthy chicks or pullets from reputable hatcheries.
• Cost: The cost of chicks or pullets varies by breed and age. Budgeting ₦100,000 to ₦300,000 for initial stock is a practical estimate.

3. Housing and Equipment:

• Requirement: Build secure and well-ventilated poultry pens. Invest in essential equipment such as feeders, drinkers, nesting boxes, and heating lamps for chicks.
• Cost: Construction costs depend on the scale of your poultry farm. Budgeting ₦100,000 to ₦500,000 for initial housing and equipment is a reasonable estimate.

4. Feed and Nutrition:

• Requirement: Develop a balanced feeding program for different stages of poultry growth. Invest in quality poultry feed to ensure optimal health and productivity.
• Cost: Feeding costs depend on the number of birds and the chosen feed. Budgeting ₦50,000 to ₦100,000 for initial feed is a practical starting point.

5. Health Management:

• Requirement: Implement a health management program, including vaccinations and regular check-ups. Establish a relationship with a veterinarian for professional advice.
• Cost: Veterinary services and vaccinations costs vary. Budgeting ₦50,000 to ₦100,000 annually for health management is a practical estimate.
• Requirement: Hire reliable labor for daily farm operations, including feeding, cleaning, and health monitoring.
• Cost: Labor costs depend on the size of your farm and the number of employees. Budgeting ₦50,000 to ₦150,000 monthly for labor expenses is a practical estimate.

7. Marketing and Branding:

• Requirement: Create a brand identity for your poultry farm. Develop a professional website, business cards, and marketing materials. Establish relationships with local markets and potential buyers.
• Cost: Marketing costs vary, but budgeting ₦30,000 to ₦100,000 for initial branding and promotional activities is a practical starting point.

8. Insurance:

• Requirement: Consider insurance coverage for your poultry farm to protect against unforeseen events such as disease outbreaks or natural disasters.
• Cost: Insurance costs vary, but budgeting ₦20,000 to ₦50,000 annually for insurance is a practical estimate.

9. Record Keeping and Management:

• Requirement: Implement a record-keeping system to track expenses, income, and farm performance. Consider using digital tools for efficient management.
• Cost: Digital tools and software costs vary. Budgeting ₦10,000 to ₦30,000 for record-keeping systems is a reasonable estimate.

Starting a poultry farming business in Nigeria requires careful financial planning and a commitment to best practices. While the costs outlined provide a general overview, it’s essential to conduct thorough research and tailor your budget to your specific circumstances and location. Success in poultry farming not only requires financial investment but also dedication to the well-being of your birds and continuous improvement of your farming practices.

Embarking on a poultry farming venture in Nigeria is not merely a business endeavor; it’s a commitment to contributing to the nation’s food security and economic growth. By combining innovative practices with traditional wisdom, your poultry farm has the potential to be a transformative force in the dynamic and flourishing landscape of Nigerian agriculture. Prepare to flock to success and reap the rewards of a thriving poultry farming business in Nigeria.

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Poultry Farm Business Plan Sample (With Financial Template)

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This is a sample business plan for a poultry farm based in Nigeria. The sample business name used is Nutrichic Farms. 

The business operates a poultry farm that breeds broiler and layer chickens, and is located in Nasarawa state.

The business plan outline used is a simple business plan that follows a standard business summary template used by most business schools and is usable for applying for loans, grants, and equity funding.

You can use this business plan as a guide to develop a business plan for your poultry business.

Introduction

Nutrichic Farms is a poultry farm located in Nasarawa state, Nigeria. We rear broiler and layer chickens for eggs and meat production and sales.

Through our farm, we produce healthy chickens and eggs, which are distributed at local markets in Nasarawa and other neighboring states.

Business Analysis

Nutrichic Farms operates a lean model poultry farm that houses a chicken shelter and a feed production chamber.

We produce our chicken feeds in-house to reduce cost of breeding and to ensure healthy nutrition for our chickens.

This ensures that our layer chickens lay more eggs, and our broilers are ready for sale as quickly as possible.

To ensure a fast and efficient sales process for our eggs and chickens, we have a distributor network that consists of 20 egg distributors and 15 chicken distributors within Nasarawa.

This makes our sales process faster and remittance of payments more accountable.

We are looking to make our production and distribution even more efficient by procuring more feed production machines and distribution vans for transporting our products to the market.

Product Pricing

Our fresh eggs are sold at a wholesale price of 720 Naira per crate. Our mature broilers are sold at a wholesale price of 1,500 Naira, while our old layers are sold at a wholesale price of 1,300 Naira.

On the average, we sell 65 crates of eggs, and 80 chickens per week.

Business Model & Profitability

Business model.

Our business model focuses on producing healthy chickens and eggs, reducing production costs, utilizing competitive price points, and being fast to market by leveraging our distributor network.

Expected annual customers

Since we already operate a direct B2B sales model using our distributor network, our customer base is already set. 

We have 20 egg distributors and 15 chicken distributors already. Once we increase our production capacity, we’ll be able to triple this number and grow our sales.

Estimated Annual Revenue

Currently, we are able to distribute 65 crates of eggs and 80 chickens per week, which brings us an annual revenue of 2.4 million Naira and 5.8 million Naira.

We estimate that our total annual revenue of 8.2 million can be tripled once we scale our production and make our distribution more efficient.

Production & Distribution Cost

Our production costs include procuring day-old chickens for 100 Naira each, raw materials for feed production, vaccination, and fuel to power the production plant, pump water, and power the chicken shelter.

Our distribution costs include weekly transportation, logistics and other miscellaneous expenses.

Profit Margin

Currently, our profit margin stands at 65% but we are looking to scale that up to 80% once we begin the next phase of our expansion plans.

Nutrichic Farms was launched by Solomon, who is currently the CEO of the business.

Solomon has a background in agric economics and farming, and has been managing his family farm since the past 20 years.

The current business has remained a family holding, with staff consisting mainly of family members.

Other team members include Mr. Hassan, the feed plant technician; Mr. Kehinde, the truck driver and distribution head, and Ms. Victoria, our quality control and business development manager.

Each person on this team brings a unique skill set that is required to drive the business forward and fulfill the needs of our customers.

Business Journey

Nutrichic Farms was launched in 2015 by Solomon due to his passion for poultry and farming.

The business was launched with a capital of 300,000 Naira, which purchased 50 birds, built a makeshift chicken shelter, and purchased some chicken feeds.

Over the past 5 years, Nutrichic Farms has grown so much that we have been able to build a larger and more standard chicken shelter, drilled a borehole, and started our own feed production.

Since then, we have sold over 30,000 chickens and 10,000 crates of eggs, making sales of over 10 million Naira.

In that time, we have also implemented our strategy for business development and grown our distributor network. We are hoping to grow this network further in the next phase of our business.

Market Analysis

Market size/target audience.

According to Sahelcp, the poultry market in Nigeria is worth 80 billion Naira.

We estimate that the poultry market in Nasarawa and its environs is worth 0.5% of the total poultry market in Nigeria.

Hence, our market size is estimated to be worth 400 million Naira. 

With the population in Nasarawa growing impressively year-on-year, we estimate that our target customers comprise over 4,000 retailers of chickens and eggs, and over 1.5 million consumers of chicken and egg.

Marketing Plan

Our marketing plan involves incentivizing and leveraging our distributor network.

We want to help these distributors of chicken and egg get the right products promptly at the right prices and to make more profit.

We plan to grow our distributor network to at least 2,000 distributors in the next 2 years.

This would help us boost sales and collect better feedback on the needs of retailers and final consumers.

SWOT Analysis

Strengths: Our Strengths lie in our strategic distributor network, strong business efficiency, and growing brand.

Weaknesses: Our identified weak areas are limited markets due to physical nature of business, and Poor transport infrastructure which relies too much on external logistics partners.

Opportunity: Our identified opportunities include the growing population and demand for chicken and eggs, strong local brand identity, and the room for growth in our production and distribution.

Threats: We see threats to our business in different areas such as individual sellers in the market competing on price, logistics partners failing on deliveries, and wholesalers buying from outside the state.

Business Needs

Nutrichic Farms is in need of funds to purchase more machinery for our feed plant, purchase trucks for our distribution, and marketing to grow our distributor network.

We plan to grow our distributor network to at least 2,000 distributors in order to capture more market share and consolidate our brand positioning.

If these requirements are met, it would help us meet our business & financial goals.

Future Plans 

Over the next two years, we plan to grow our distributor network from less than 50 to 2,000.

This would help us capture a wider segment of the market, triple our sales, and enjoy a strong market advantage. 

Cash Flow Projection

To create a cash flow Projection for your poultry farm business plan, click here to use our Simple Financial Template .

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How to Start a Poultry Farming in Nigeria: Business Plan, Breeds, Cost, Profit, Loan, Subsidy, and Management

Table of contents, what is poultry farming in nigeria, choosing the type of poultry bird to rear in nigeria, steps to start a poultry business plan in nigeria, selecting a suitable location for poultry farming in nigeria, providing good housing for poultry farming in nigeria, feeding and caring for the poultry birds in nigeria, small-scale poultry farming in nigeria, poultry breeds available in nigeria, poultry farming areas in nigeria, poultry production methods in nigeria, is poultry farming profitable in nigeria, good husbandry practices for nigeria poultry farmers, poultry farming loans and subsidies in nigeria, poultry farm problems in nigeria, poultry farming challenges in nigeria, set-up cost to start a poultry farming business in nigeria, profit for poultry farming business in nigeria, organic poultry farming in nigeria .

Poultry farming is a major agricultural activity in Nigeria. The country has a large population and a growing demand for poultry products. Nigeria is Africa’s largest producer of eggs and the second-largest producer of chicken meat. The industry employs millions of people and contributes significantly to the country’s economy. 

How to start a poultry farming in Nigeria

Poultry farming in Nigeria is raising chickens, ducks, turkeys, and other poultry for meat or eggs. Chickens are the most common poultry raised in Nigeria and can be raised for meat or eggs. Geese are the least common poultry raised in Nigeria. 

The common poultry birds raised by poultry farmers include chicken, turkey, duck, geese, quail, pigeon, and guinea fowl. Chicken is the widely consumed bird in Nigeria, making it an appropriate choice for farmers who want to take benefit of the growing poultry meat and egg demand in Nigeria; Turkey is a close second.

If you prefer a market with less competition, you can rearing quails, pigeons, or ducks. You will also need to consider the climate in Nigeria when choosing the type of bird to rear. Some types of poultry birds do not do well in hot climates, so it is important to choose a bird that can withstand the climate conditions in Nigeria.

• Choose your poultry niche : You can start many poultry businesses in Nigeria, so it’s important to choose the right one. Do the research and decide which poultry farming would be the most profitable for you.
• Get started with a business plan : A good poultry business plan is essential for any successful business, especially for a poultry business. Outline your goals, objectives, and strategies for your poultry farm and ensure you have a solid financial foundation.
• Choose the right location : The success of your poultry farm will largely depend on its location. Make sure you choose a location convenient for transport and have access to good-quality water and land.
• Build or buy your farm: Once you’ve chosen your location, it’s time to start building or buying your farm. If you’re building your farm, follow all the necessary construction regulations. If you’re buying an existing farm, ensure it meets all the requirements for a successful poultry operation.
• Stock your farm : Now it’s time to start stocking your farm with birds. This is where much of the cost associated with starting a poultry business comes in, so make sure you purchase healthy birds

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• Several factors are considered for selecting a location for a poultry farm in Nigeria. The first factor is climate. The climate in Nigeria is generally hot and humid, which is ideal for chicken production. However, certain areas of the country experience periods of drought, which can impact poultry production negatively.
• The second factor to consider is proximity to markets. Poultry farms need to be located near markets where they can sell their products easily. Transport costs will eat into profits if the farm is too far from the markets.
• The third factor to consider is land availability and quality. Poultry farms require a lot of land for chicken housing and grazing areas. The land should also be of good quality to support chicken production effectively.
• When selecting a site for a poultry farm in Nigeria, it is important to consider these three factors carefully. Doing so can ensure that your poultry farm has the best chance of success.
• One popular type of housing for poultry farms in Nigeria is the A-frame chicken coop. These coops are simple to construct and can be made from locally sourced materials. They provide a safe and secure environment for your birds and can be easily expanded as your flock grows.
• Another option for housing your poultry in Nigeria is to use an existing building on your property, such as a shed or outhouse. If you select this option, it is important to ensure that the building is well-ventilated and has plenty of light. You will also need to protect your birds from predators by installing wire mesh over all windows and doors.
• Regardless of which type of housing you choose for your poultry farm in Nigeria, keeping it clean and well-maintained is important. Regular cleaning and disinfection will help prevent disease spread and keep your birds healthy and productive.

Commercial feeds are generally more expensive than locally produced feeds, but they are also more nutrient-rich and improve the health of your birds. If you decide to use commercial feeds, follow the manufacturer’s recommendations on how much to feed your birds. Locally produced feeds are often cheaper than commercial feeds but may not be as nutrient-rich.

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You will need to experiment with different types of locally produced feeds to find one that works well for your birds. No matter what feed you use, it is important to provide fresh water for your birds. Water helps them stay hydrated and aids in digestion. Be sure to clean and refill water containers regularly to prevent the spread of disease.

Small-scale farmers have many opportunities to get involved in poultry farming, from raising chickens for eggs to meat production. The first step in starting a small-scale poultry farm is to choose the type of poultry you want to raise. Chickens are the most common choice, but you can raise turkeys, ducks, or geese. Once you’ve decided on the type of poultry you want to raise, you’ll need to purchase some baby chickens or other young birds. You can buy these from a local hatchery or online.

After you’ve obtained your baby chickens, you’ll need to set up a brooding area where they can stay warm and safe while they grow. A simple brooding set-up can be made using a cardboard box and a heat lamp. Once your baby chickens have outgrown the brooding area, they can be moved into a larger coop or pen. As your birds grow, you’ll need to provide them with food and water. A good diet for chickens includes grain, greens, and chicken feed. You can either grow your food for them or purchase it from a local feed store. Water must be available at all times and should be changed regularly.

• The Kadaknath chicken is a native breed known for its black plumage. These birds are typically used for meat production.
• The White Leghorn is a popular egg-laying breed that originates from Italy. These birds are white and are known for their high egg production.
• The Rhode Island Red is another popular egg-laying breed in many commercial operations. These birds are red and are known for their high egg production.
• The Sussex chicken is a dual-purpose bird that can be used for both meat and egg production. These birds are typically brown or red and originate from the United Kingdom.

There are many poultry farming areas and locations in Nigeria. The main poultry farming areas are in Kaduna, Oyo, Osun, and Lagos. There are also smaller poultry farms in other regions of the country. Nigeria has many poultry farming areas, but the three main regions are the Northern, Central, and Southern parts.

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• The Northern region is home to the majority of Nigeria’s chicken farms. This area has a more temperate climate, which is better for chicken production. 
• The Central region is also a key area for poultry farming, as it contains the country’s capital, Abuja. This region has a hot climate, which can be tough on chickens, but many large-scale operations have overcome this challenge. 
• The Southern region has a tropical climate and is home to some of Nigeria’s biggest commercial broiler farms. This area presents challenges for chicken farmers, but there is still good potential for success.

There are approximately 1,500 poultry farms in Nigeria, with the majority being small-scale operations. Over two million Nigerians are employed in the poultry sector. Poultry farms vary in size from small family-run operations to large commercial farms. The Nigerian government offers incentives for investors interested in starting or expanding a poultry farm. These incentives include tax breaks and access to low-interest loans. The government also provides training and extension services to farmers.

• Intensive poultry production is the common method, requiring less land and capital investment. Birds are typically housed in overcrowded conditions and given little outdoor access. They are also fed a high-protein diet to promote rapid growth. While this method of production can be profitable, it often results in lower-quality meat and eggs due to the stressful living conditions of the birds.
• Extensive poultry production is less common but is seen as more humane. Birds are given more space to move around and typically have access to the outdoors. They are also fed a more natural diet, which results in higher-quality meat and eggs. However, this method of production is less profitable due to the higher costs associated with it.

Poultry farming is a lucrative business that supplies the demand for chicken and eggs in Nigeria. One of the best ways to ensure profitability in poultry farming is to keep your chickens healthy. This means vaccinating them against common diseases and providing them with regular veterinary care.

One of the most important things a poultry farmer in Nigeria can do to ensure the health and productivity of their flock is to practice good husbandry. 

1. Keep your birds clean and healthy – Regularly clean and disinfect your bird pens, coops, and equipment. This will help prevent the spread of disease among your flock.

2. Provide fresh, clean water at all times – Make sure your birds have access to clean water. This is essential for their health and well-being.

3. Keep your birds well-fed – A healthy diet is essential for your birds’ growth and development. Be sure to provide them with a balanced diet with all the necessary nutrients.

4. Give your birds plenty of space – Birds need plenty of space to move around and exercise. If possible, allow them access to an outdoor area where they can stretch their wings and explore.

5. Monitor your birds closely – Keep a close eye on your birds’ health and behavior. If you notice anything unusual, contact a veterinarian immediately.

6. Vaccinations and other medical supplies – Keeping your birds healthy is crucial to the success of your poultry farm. Vaccinations and other medical supplies can add significant costs to your budget, but they are essential for preventing disease and ensuring high productivity levels.

7. Biosecurity on your poultry farm – Last but not least, you need to be careful about biosecurity on your poultry farm. This means taking measures to prevent the spread of diseases between your chickens and other animals or humans. Some simple steps include maintaining cleanliness, disinfecting equipment, and restricting visitors to your farm to prevent the spreading of diseases.

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The poultry farming industry in Nigeria is the most lucrative business. Poultry farming loans and subsidies are available from various financial institutions in Nigeria. The interest rate on these loans is relatively low, making them affordable for small-scale farmers. The Nigerian government also provides subsidies for poultry farmers who meet certain criteria. These subsidies can cover up to 50% of the cost of poultry production, making poultry farming a viable option for small-scale farmers in Nigeria.

Poultry farming in Nigeria can be lucrative, but farmers face common problems. One of the most common problems is finding reliable staff to help run the farm. Another common problem is disease outbreaks. These can occur when birds are not appropriately vaccinated or come into contact with wild birds.

Infectious diseases such as Newcastle Disease and Avian Influenza can quickly spread through a flock and decimate a farm’s population. Finally, another challenge that poultry farmers face is theft. This is particularly common in rural areas where farms are often left unattended for long periods.

One key challenge facing poultry farmers in Nigeria is disease control. Outbreaks of avian influenza have caused significant losses for the industry in recent years. However, with proper biosecurity measures in place, such outbreaks can be prevented.

• The high cost of day-old baby chickens : Day-old baby chickens can be expensive if you buy from a reputable breeder. This makes it difficult for small-scale farmers to get started in the business.
• The risk of disease : Poultry farms are susceptible to diseases such as Newcastle Disease and Avian Influenza, which can kill entire flocks. Strict biosecurity measures must be implemented to minimize the risk of disease outbreaks.
• The need for specialist knowledge : Poultry farming requires specialist knowledge and skills, which can be difficult to acquire. There is also a lack of extension services and technical support available to poultry farmers in Nigeria.

Despite these challenges, poultry farming in Nigeria can be profitable if done correctly. With a growing population and increasing demand for chicken meat and eggs, there is great potential for growth in the Nigerian poultry industry.

You can start a small-scale poultry farming business in Nigeria with less than N150,000. Medium to large-scale farms need a lot more money, but starting a small poultry business is advisable even if you have more than enough funds to spare.

To calculate the profitability of poultry farming in Nigeria, you will need to consider the following factors:

• The cost of feed per bird
• The number of birds you plan to raise
• The price you plan to sell your chicken at
• The cost of any other necessary supplies (such as housing and water)

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The average poultry farm set-up cost in Nigeria is about N150,000. This cost includes the purchase of day-old baby chickens, equipment, and other materials needed to get started. Commercial poultry farm set-up costs in Nigeria can be as high as N1 million. The average profit from a poultry farm in Nigeria is about N50,000 per month. This profit can be increased by selling eggs and meat at higher prices or by reducing the cost of production through better management practices.

Organic poultry farming in Nigeria is a type of farming where chickens are raised without antibiotics or other growth-promoting drugs. Chickens are fed an organic diet and are provided with ample space to roam and forage. Organic poultry farmers in Nigeria must meet the standards the Nigerian government sets to be certified. These standards include providing chickens with a clean and comfortable environment, access to fresh air and sunlight, and a nutritious diet.

Farmers must also avoid using any synthetic pesticides or herbicides on their farms. Organic poultry farming in Nigeria is still relatively new, but it is growing in popularity as more people become aware of the benefits. Consumers are willing to pay more attention to organic chicken meat because they know it is better for their health and the environment. Poultry farmers who switch to organic production can expect higher profits as demand for their product increases.

Poultry farming provides employment for many people and contributes to the economy. Poultry farming generally requires less land and capital than other livestock farming ventures, making it a more accessible option for small-scale farmers. Poultry farming is an important agricultural activity in Nigeria. It provides a source of income for small-scale farmers and contributes to the country’s food security.

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Nigerian Price

Poultry farming business in nigeria & cost of starting (2024).

Poultry farming is one of the most lucrative forms of farming in Nigeria today. There is a very huge market for poultry products such as meat, eggs, and dung. The cost of starting a poultry farming business in Nigeria depends on the aspect of poultry farming that you want to engage in.

In this post, we will discuss the cost to start the different types of poultry farming. However, we will focus more on chickens (broilers and layers). We will also tell you how to start a profitable poultry farming business in Nigeria. Let’s dive straight in without further ado.

Cost of Starting a Poultry Business in Nigeria

According to research, many Nigerians are becoming millionaires simply by becoming poultry farmers. The first step to starting a profitable poultry business is first finding out how much capital you need. How much does it cost to start a profitable poultry farm? Several ingredients go into running a poultry farm. It doesn’t matter whether you deal in broilers or layers, there are certain costs that you cannot do without. Here is a list below:

Land is one of the primary needs you must meet when starting a poultry farm. You can either purchase land or lease one for the business. The cost of land is relative as it depends on the scale at which you want to run the farm and your location. In some parts of Nigeria, you can get farmlands for between N300,000 and N3 million per plot.

Housing construction

After getting the land, the next thing that you must invest in is the housing for the birds. There are different types of housing depending on the rearing system that you will employ. The cheapest method is the free-range system where there isn’t an exact building. You just allow the birds to roam around in the compound.

For best results, it is best to employ floor or cage systems. The floor system just requires you to build a poultry house and allow the birds to roam around in the building. Alternatively, you can make use of bird cages. This method is regarded as the best for layers. The cost depends on the size of the farm, but cages could cost from N300,000 – N500,000 for 500 birds.

Poultry equipment

There is a whole array of poultry equipment that you need to run a profitable poultry farming business. Your choice will depend on the system that you choose. The common pieces of poultry equipment that you will need include:

• Heaters or brooders
• Laying nests
• Ventilation fan

If you are running a commercial poultry farm, you should budget between N600,000 and N800,000 for poultry equipment. Smaller farms can budget between N60,000 and N210,000.

Vaccination and other medication costs

Vaccination is very important to ensure that your birds remain healthy. It also ensures that you reduce the mortality rate on your farm to the barest minimum. Just so you know, birds are highly prone to diseases and a single disease outbreak can wipe out the whole farm.

If you have a farm of 500 chicks, you should budget between N200,000 and N260,000 for vaccination and medication. The price may be negotiable depending on the veterinarian that you consult.

This is one of the most important and non-negotiable costs to deal with in poultry farming. You can either formulate your feed or purchase ready made feed from established vendors. The former option is more affordable, however, many of the feed ingredients on the market are adulterated. As such, we suggest that you stick to purchasing from established companies.

The feeding cost for 500 birds is between N150,000 and N300,000 for a month. If you are raising layers, you need to feed them for about 18 months. This means that you could spend between N2.7 million and N5.4 million on feeding alone.

Purchase of chicks

The main raw material for poultry farming is chicks. Without them, everything else is a waste of investment. Currently, day-old chicks cost between N500 and N1000. If you want to purchase point-of-lay birds, they cost between N2,500 and N3,000.

PRICES LAST UPDATED: NOVEMBER 18, 2022.

How to Start the Poultry Farming Business in Nigeria

Wondering how to start the poultry business in Nigeria? Check out the tips below:

Study the market

The first thing that you should do is to study your market. A detailed feasibility study helps you to know what the market holds, how much capital you need, and who your prospective customers are. It also helps you to know who your competitors are and how to surpass them.

Write a business plan

After you have carried out a detailed study of the market, the next step is to write a business plan. A business plan gives a clear indication of what your business sets out to achieve. It acts as the map of your business and also helps you to attract investment when the need arises. If you cannot write a detailed business plan, you can draw up a Business Module Canvas (BMC) instead.

Seek out reputable suppliers

Two very important aspects of this business are getting healthy stock and purchasing healthy feed. You need reputable suppliers for both. Ensure that you find suppliers that have a healthy stock of birds. Doing this saves you from having excess mortality on your farm. It also assures you of high productivity. You should also seek out suppliers that have the best quality feed on the market. Don’t settle for cheap prices as they could mean substandard products.

Raise capital

Capital here means the funds you need for the business as well as the land and the equipment that you need. You can either raise capital from your savings or taking a loan. Other ways of raising capital include grants and funding from friends and family members.

Gather knowledge

In rounding up this post, we suggest that you gather as much knowledge about this business as possible. Poultry farming requires a hands-on approach, so you must be knowledgeable about raising birds. You can reach out to existing farmers to find out their failures and successes. This knowledge will help run your business.

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Poultry business plan in nigeria: how to write one.

Thinking about starting a poultry business in Nigeria?

You’re on the right track! Let’s talk about the great opportunities and the money-making potential that poultry farming holds for you in our country.

Page Contents

Poultry Farming Opportunities in Nigeria

Nigeria is buzzing with opportunities for poultry farming. This means you have a chance to turn your love for chickens into a successful business. People in Nigeria really like chicken, and that’s good news for your potential poultry venture.

Profitability Potential

Now, let’s get down to the exciting part – making money. Poultry farming has the potential to bring in some good cash. Whether you’re thinking about raising chickens for meat or eggs, there’s a market waiting for you. The demand for poultry products is high, and that means you have a chance to make a profit.

Why You Need a Solid Business Plan

Starting a poultry business isn’t just about having a bunch of chickens. You need a plan. Think of it like having a map before going on a journey. A solid business plan helps you know where you’re going, how to get there, and what to do when you arrive. It’s like your business GPS!

Purpose of a Business Plan

Before you dive into poultry farming, having a business plan is super important. It’s like having a roadmap for your success. A business plan helps you figure out your goals, how much money you need, and how to make your poultry business thrive. It’s like having a blueprint for building a strong and successful business.

So, if you’re dreaming of running a successful poultry business in Nigeria, buckle up! We’re here to guide you through the poultry business plan.Get ready to turn your poultry dreams into reality!

Poultry Products & Offerings

In the following sections, we’ll explore the various products and offerings you can focus on to make your poultry business successful.

a). Broiler Production for Meat

• Raising broilers means growing chickens for their tasty meat.
• These chickens are specially bred for their delicious and tender meat.
• Broiler production can be a great choice for your poultry business as there is a high demand for chicken meat.

b). Egg Production for Consumption

• Another feather in your business cap can be egg production.
• Hens lay eggs, and you can sell these eggs for people to eat.
• Egg production is a steady and reliable part of many poultry businesses.

c). Value-Added Products like Packaged Chicken, Quail Eggs, etc.

• You can take your poultry business to the next level by creating value-added products.
• Consider packaging chicken meat for convenience.
• Quail eggs are a unique offering that can attract customers looking for something different.
• Adding value to your products can set your business apart and attract more customers.

Why Consider These Offerings

1. diverse income streams.

By offering different products like meat and eggs, you create multiple ways for your business to make money.

Diverse income streams can help your business stay strong and grow over time.

2. Meeting Market Demand

Broiler production meets the high demand for chicken meat in Nigeria.

Egg production is a constant need as people use eggs in their daily meals.

Offering what people want ensures your business stays in demand.

3. Standing Out with Value-Added Products

Packaging chicken meat and selling quail eggs can make your business stand out.

People appreciate convenience, and unique products can attract new customers.

Standing out in the market helps your business thrive.

In your poultry business journey, considering broiler production, egg production, and value-added products is a wise move. These offerings not only cater to market demands but also provide you with various income streams. Remember, adding value to your products can set your business apart and make it a feathery success in the poultry industry. Good luck on your entrepreneurial journey!

Read also: 5 Online Businesses That Pay Daily in Nigeria (Free Registration)

Operational Plan

The operational plan helps you understand the steps you need to take to make your poultry venture a success.

1. Poultry Breeds Selection

Choosing the right chickens is a crucial part of your poultry business. Think about it like picking players for a soccer team – you want the ones that can play well and stay healthy. In Nigeria, common breeds include layers and broilers. Layers are good for eggs, while broilers grow big and are good for meat. Consider your goals and pick the breed that fits your plan.

2. Housing Types & Equipment Requirements

Just like we need a comfy place to live, chickens need a safe and cozy home too. Think about the type of house your chickens will live in. There are different housing options, from simple pens to more advanced structures. Make sure it keeps them safe from rain and sun. Don’t forget about equipment like feeders and waterers – these are like the tools that make life easier for your chickens and you.

3. Feed Supply and Storage

Chickens need good food to stay healthy and lay eggs or grow into big, tasty broilers. Plan where you’ll get their food and how you’ll store it. Imagine it’s like planning your meals for the week – you want to make sure you have enough and keep it in a safe place. Consider talking to local feed suppliers and check prices to get the best deal for your feathery friends.

4. Security Measures Against Theft

Just like we lock our doors at night, you need to keep your chickens safe from thieves. Think about the security measures for your poultry farm. Fencing and proper lighting can help keep unwanted visitors away. Remember, a secure farm means happy and healthy chickens. 

Production Planning 

When it comes to production planning, there are a few key aspects you need to consider.

Stocking Density and Production Scheduling

To make your poultry business thrive, think about how many chickens you want on your farm. This is called stocking density. It’s like figuring out how many friends you can comfortably invite to your party. Plan your farm space well, so your chickens have enough room to move around and stay healthy.

Decide on a schedule for when your chickens will be growing and laying eggs. It’s like planning a calendar for different activities. This way, you can make sure your chickens are happy and productive all year round.

Projected Yields Targets Over Years

Setting goals is important for any business. For your poultry farm, think about how many eggs or chickens you want to produce each year. It’s like deciding how many points you want to score in a game. This helps you stay focused and work towards success.

Start small and gradually increase your targets as your experience grows. It’s like learning to ride a bike – start with training wheels and take it step by step.

Planning for Mortality Rates

In the world of poultry farming, it’s important to understand that not all chickens may make it to the finish line. Plan for some chickens not making it, known as mortality rates. It’s like being prepared for rainy days. This way, you won’t be caught off guard, and you can still reach your goals even if some challenges come your way.

Market Analysis

When it comes to running a poultry business, understanding the market is key. Let’s break down the market analysis into three important parts:

1. Consumer Demand and Preferences

Firstly, think about what people in your area like. Do they prefer fresh eggs, chicken meat, or both? Understanding what your customers want helps you plan what to offer.

Consider talking to people in your community or doing a small survey to know their preferences. If you know what your potential customers like, you can make sure your poultry business meets their needs.

2. Pricing Considerations and Sales Channels

Next, let’s talk about how much to charge for your poultry products. Look around your area and check the prices of similar products. This can give you an idea of what customers are willing to pay.

Also, think about where you’ll sell your poultry products. Are there local hotels, restaurants, or markets where people often buy these items? Choosing the right sales channels can make a big difference in reaching your customers.

3. Competitor Assessment

Lastly, it’s important to know who else is selling poultry products in your area. Check out other poultry businesses and see what they are offering. This can help you find ways to stand out and offer something unique.

Think about what you can do differently or better than your competitors. Maybe you can provide fresher eggs or have a special deal that attracts customers.

Financial Plan

Financial planning is all about determining how much money you’ll need and where it will go. Some of the areas to plan your finances around are:

Costs of Land, Construction, and Equipment

First things first, you need a place for your poultry adventure. Think about how much the land will cost, the buildings you’ll need, and the equipment to run the show. Imagine it as setting up your farm base – the place where all the chicken action will happen.

Labor Costs Projections

Now, let’s talk about the people who will help you on your farm journey. Consider how much you’ll pay your workers. It’s like figuring out the team’s salaries and making sure they have everything they need to keep things running smoothly.

Projected Revenue and Profitability Year-Wise

Okay, so you’ve got your farm, your team, and the chickens are ready to roll. But, how much money will you make? Picture it as a game plan for each year – how many eggs or chickens will you sell, and how much money will you bring in? It’s like having a roadmap for your success.

Funding Requirements – Own Equity vs. Loans

Here comes the big question – where will the money come from? Consider how much of your own money you can invest (that’s your equity) and if you’ll need a loan from the bank. It’s like making sure you have enough cash to start things off or if you need a little help from your friendly neighborhood bank.

Risks & Mitigations 

Starting your poultry business in Nigeria can be exciting, but it’s important to know about possible challenges. Here are two big ones and how you can handle them:

1. Disease Outbreaks

Keeping your chickens healthy is crucial. Diseases can sometimes spread among them, which might affect your production. To stay safe, work closely with a vet. Regular check-ups and vaccinations can prevent many illnesses. Also, keep your farm clean – a tidy space helps keep diseases away.

2. Seasonal Impacts on Production

The weather can have an impact on your poultry business. Some seasons might make it harder for your chickens to thrive. Plan ahead by checking the weather forecasts. If you know a tough season is coming, make sure your chickens have proper shelter and enough food. Being prepared helps you handle the ups and downs of different seasons.

3. Price Fluctuations and Regulatory Changes

Prices for things like chicken feed can change, and rules about running a poultry business might too. To handle this, keep an eye on the market. Know when prices might go up or down, and plan your budget accordingly. Stay updated on any new rules that might affect your business. Adapting to changes will help you keep your poultry farm running smoothly.

Read also: Is Thrift Business Profitable in Nigeria? What To Know

Implementation Roadmap

Starting a poultry business involves some important steps. Here’s a simple breakdown to guide you:

1. Securing Land

First things first, you’ll need a piece of land to set up your poultry farm. Look for a location that’s safe, easily accessible, and has enough space for your chickens to roam around.

2. Constructing Sheds and Facilities

Once you have the land, it’s time to build the homes for your chickens. Construct sturdy sheds where they can stay comfortably. Make sure to include spaces for feeding and watering them. Safety is key!

3. Acquiring License

To run a poultry business, you need permission from the authorities. Getting a license is like having a special pass to do your business legally. It’s important to follow the rules to avoid any issues later on.

4. Timelines

Creating a timeline helps you plan when each step will happen. For example, set a goal for when you’ll secure the land, another for when the sheds will be ready, and so on. This keeps things organized.

5. Staff Hiring Schedule

As your poultry business grows, you might need some helping hands. Plan when you’ll hire staff and tie it to your production expansion. More chickens mean more work, and having a schedule helps everyone know what to expect.

Read also: Is Facebook Marketplace Available in Nigeria? Yes! Here’s How To Use It RIGHT

Starting a poultry business in Nigeria is exciting, and with a well-thought-out plan, you’re on your way to success. Remember, step by step, you can make your poultry dreams a reality. Good luck on your entrepreneurial journey!

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Poultry Business Plan in Nigeria: Starting your Poultry Business

Over the few years alone, we have hundreds of entrepreneurs and business owners create a poultry business plan in Nigeria.

On this page, we will first give you some background information with regards to the importance of business planning for starting your poultry. We will then go through a poultry business plan template step-by-step so you can create your plan today.

If you’d like to quickly and easily complete your catering business plan, click here to get a copy of our proven poultry business plan template and complete your business plan and financial model in hours.

What is a Business Plan?

Simply put, a business plan is a road map. It grants you a snapshot of your poultry business as it stands today and exhibits your growth strategies and potentials for the next five years.

A poultry business plan explains your business’ goals and your strategy for reaching them. This also includes market research and industry demystification to support your plans.

Why you need a Business Plan for your Poultry Business

If what you want is to grow your existing poultry business or perhaps you are a start up fresh to the business, you need a business plan. This document will assist you to do a lot of things in the course of your company’s lifespan.

For example, good business plans attract investors and raise funding, if needed. The plan also shapes out the growth of your poultry business in order to improve your chances of success.

Finally, do not be misguided to think that once you are done with the plan once, that is all. Your Poultry business plan is a living document that should be updated annually as your company evolves and grows.

Source of Funding for a Poultry Business

Well, it always come down to money at the end doesn’t it. When it comes to the issue of financial dependence for most poultry companies in the country, the major sources of funding for the business are savings and/or credit cards of the business owner, bank loans and angel investors.

To obtain bank loans, banks will want to examine your business plan and gain confidence that you will be able to repay your loan and interest. The loan officer will want to confirm that your financials are reasonable.

A professional plan should answer all or most of their questions. Such a proper plan will give the loan agency more confidence that you can successfully and professionally operate your business.

Another common form of funding for poultry businesses is angel investors. These are wealthy individuals who fund business ventures. They will either grant you a direct loan like a bank or take equity in return for their funding.

These days, another new funding model for agro-based businesses called crowdfarming is scaling up in Nigeria. Basically, crowdfarming involves sourcing funds from a crowd of individuals to invest in smallholder agricultural businesses in return for a stipulated ROI over a designated period of time. Some tech startups involved in enabling the growth of crowdfarming enterprises in Nigeria include FarmCrowdy , ThriveAgric , amongst others.

However, depending on the scale your business is at, certain investors would not fund a small business. These sharks and venture capitalists might consider funding a poultry company with multiple locations or a massive footprint, but never an individual location.

The simple reason for this is that most venture capitalists operate money at a scale that requires they make millions of dollars in return when they make an investment. A small poultry farm run by a lone farmer in a cramped location could never achieve that.

Poultry Business Plan Template

Your plan should include the following sections:

Executive Summary

Even though this part of your plan comes first, it is normally the last section you write because it provides a summary of each key section of your plan.

This section provides an introduction to your business plan with the aim of swiftly immersing and engaging the reader. Explain to them the type of poultry farming business you are operating and the status; for example, clarify how long you’ve been in business or if you already have an operating poultry business.

Then, provide a concise description of what the reader should be expecting in each of the subsequent sections of your plan. For example, give a brief overview of the farming industry.

Discuss the type of Poultry business you are operating. Share your major competitors. Give an overview of your target customers. Exhibit your marketing plan. Name and introduce your team. And break down your financial plan to digestible bits.

Company Analysis

Here in this section of your plan, you will detail the type of poultry business you are operating.

For example, you might be involved in wide varieties of lucrative opportunities or have just a particular niche of this niche that your business operates in.

• Egg production (Layers breeding)
• Meat production (Broilers breeding)
• Chicken breeding (Hatchery)
• Poultry feed production
• Poultry equipment manufacturing etc.

Share the type of poultry business you operate which may be one of the above, a combination of them or something new. Also, in this section of your business plan needs to provide more background information on the business. That involves answering questions like;

• What drove you to start the business?
• What milestones have you achieved in your company’s past? These could include sales goals you’ve crested, previous contracts, etc.
• Your legal structure. Explain your legal structure here. Are you incorporated as limited liability company or a sole proprietorship? Whatever it is, your reader needs to know.

Industry Analysis

It’s necessary in your poultry business plan for you to provide an overview of the business. it serves multiple purposes by not just educating you but assisting you to understand the market in which you are operating.

Market research can boost your strategy especially when your research identifies market trends. For example, if there was a trend towards chicken, it would be helpful to ensure your plan considers this trend and aligns your business accordingly.

Being thorough in this section proves to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you should achieve that with ease.

Try to answer these questions as best you can in this analysis section of your poultry business plan:

• How big is the poultry business?
• Who are the key competitors in the market?
• Does the market increase or decrease?
• Who are the key suppliers in the market?
• What is the industry’s growth forecast over the next decade?
• Finally, how big is the potential market for your poultry business? You can find this out by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer analysis

This analysis section of your business plan must detail the customers you serve and/or expect to serve.

Poultry businesses generally serve a wide range of categories of customers so it’s important that you have defined what exactly you hope to provide for them

If you know your target customers demographic very well it will more than aid you in marketing. This way you can create customer segments for your business services, isolating different suitable atmospheres for a large range of customers.

As you can imagine, the customer segment(s) you choose will have a great impact on the way your poultry operates. Break out your intended customers in terms of their demographic and psychographic profiles.

Talk a little about the ages, genders, locations and income levels of your intended customers. Because most poultry businesses tend to serve customers living around the same city or locale, such demographic information is readily available on government websites.

These profiles and data studies explain the wants and needs of your target customers are. The more you can understand and define these needs, the better you will be at attracting and retaining your customers.

Competitive analysis

An analysis of your competition works to reveal to the reader that you know your niche or target market well. This means you need to identify your indirect and direct competitors and then focus on the latter.

Your direct competitors are the other poultry businesses whilst you Indirect competitors are the other options that customers have to purchase from that aren’t direct competitors.

This could include; pig farms, goat farms, sheep farms etc. You need to mention such competition to show you understand that not everyone who buys meat buys poultry meat.

For the direct competition, you should detail the other poultry businesss with which you compete. For local businesses, your direct competitors will be poultry businesses located in your same geographic location.

Provide an overview of the businesses of each of them and document their strengths and weaknesses. Know things about them such as:

• The types of customers they supply.
• The products they offer?
• Their pricing (premium, low, etc.)
• Their strong suits
• Their weaknesses

Think about your answers to the last two questions from the customers’ perspective. Do not be afraid to call and speak with customers you know have used your competition regarding what they like most and least about them.

The last part of this analysis section is to document your areas of competitive advantage. Talk about:

• What you will be doing that will be unique from the other businesses
• What you will provide that your competitors don’t offer (e.g., selective packaging)
• What will make it easier or faster for customers to purchase your services?
• If you will provide better customer service
• If you will offer better pricing

Reason up magnificent ways you will outperform your competition and document them in this section of your plan.

Marketing plan

In this section of your poultry plan, you have to describe to the reader how you aim to gain and retain customers. Rudimentarily, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a poultry business plan, your marketing plan should;

• Product: Reiterate the type of poultry business that you documented in your Company Analysis. Then, detail the specific products or services you will be offering .
• Price: Document the prices you will offer and how they compare to those your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices. Since these items might vary from client to client, include your core items in your plan.
• Place: Document your location and mention how the location will impact your success. For example, is your poultry business located next to a heavily populated office building, or gym, etc. Discuss how your location might provide a steady stream of customers.
• Promotion: Document how you will drive customers to your location(s). To promote your poultry business, you might consider, advertising in local print media, reaching out to local bloggers and websites, partnerships and sponsorships with local organizations, local radio advertising, maintaining a community presence by joining local networking groups and social dives, banner ads at local venues etc.

Finally, your marketing plan should talk about your brand and what you would like it to stand for.

Operations plan

Here in this section, you are to describe how you will meet your goals. Your operations plan should appropriately imply to the reader that you have a working route to achieve your goals, hence reassuring them more.

Operation plans usually possess these two distinct sections;

Long-term goals  are the milestones you hope to achieve in the foreseeable future. You could include the dates when you expect to crest a particular financial threshold, or when you hope to reach $X in sales, or even when you expect to hire your Xth employee or launch a new location.

Everyday processes or short term tasks  are all of the tasks involved in the day to day running your Poultry business such as farm maintenance, drawing up contracts, supplying the services and products, procuring supplies, etc.

Management plan

A strong management team is essential to demonstrate your poultry’s ability to succeed as a business. Highlight the experience and expertise of your key players, emphasizing those skills that prove their ability to grow a company.

You and/or your team members need to have had some direct experience in the poultry business, ideally. If so, highlight this experience but also highlight any experience you think will help your business succeed. If your team is inadequate, consider assembling an advisory board.

An advisory board includes 2 to 8 individuals who can act like mentors to your business. They would assist the business and provide strategic guidance. If needed, look for an advisory board member with experience in the poultry business or successfully running a similar enterprise.

Financial plan

This section will help you understand just how much funding you require to achieve your goal. The financial plan for your poultry business should include your 5-year financial statement. This includes your cash flow statements, income statement, and balance sheets.

Cash Flow Statement : To help determine how much money you need to start or grow your business, and make sure you never run out of money, you need a Cash Flow Statement. What most Poultry owners don’t realize is that you can turn a profit and still run out of money and go bankrupt.

For example, let’s say a company approached you with a massive $200,000 supply contract, that would cost you $100,000 to fulfill. Well, in most cases, you would have to pay that $100,000 now for packaging, transport, storage, etc. Say the company doesn’t pay you for 120 days. During that 120-day period, you could go broke.

Income Statement : (also commonly referred to as Profit and Loss statement or P&L.) shows your revenues and then subtracts your costs to show whether you turned a profit or not. You need to devise assumptions in developing your income statement.

For example, will you serve 7 clients per month or 18? Will sales grow by 3% or 12% per year? As you may have wondered, your choice of assumptions will greatly impact the financial forecasts for your business.

Do try to root your assumptions in reality, as best as you can.

Balance Sheet : A Balance sheet is a financial statement that exhibits your assets, liabilities, and shareholder equities at a specific point in time. In preparing your Balance Sheets and Income Statements, be sure to include several of the key costs needed in starting or growing a poultry business.

These could include; the location build-out including design fees, construction, etc., location operations expenses such as rent and utility bills, cost of equipment, Farm maintenance fees, payroll or salaries paid to staff, business insurance, Legal expenses, taxes and permits etc.

This section exists so you can attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more attractive.

Getting a very well written business plan for your Poultry business is worth a lot. If you follow the guide above, by the time you are done, you will understand how to achieve this better.

You will come out of it really understanding the poultry business, your competition and your customers. With this, you should be able to put the pieces together to form your own business plan.

How to Finish Your Poultry Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your poultry business plan? With Sam&Wright’s Ultimate Poultry Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your poultry business plan today.

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8 Easy Steps to Start a Profitable Small-scale Poultry Farming Business in Nigeria

Most of us know this! Yes, we are aware that finding a good-paying job in Nigeria is almost impossible. Probably, the reason you’re reading this is that you are fed up with having to submit your CV to every job advert you come across. Then you stare at your Email every day, expecting a miracle, which honestly is what finding a job in Nigeria looks like nowadays.

Well, don’t fret! Please don’t give up yet, because I am about to disclose some secret gem hidden insight. Yes, you will learn the 8 simple steps to Start a Profitable Small-scale Poultry Farming Business in Nigeria .

We’ve all at one point in time heard of entrepreneurship. Simply put, being your boss. Thousands of Nigerians are successfully establishing their businesses. They are making decent profits annually from their establishments, but I won’t delve in on that fact because that is what we see every day.

You would, however, be learning one of the highly profitable businesses only a handful of people understand. That secret gem is poultry farming. This is raising and selling birds breeds and their byproducts in exchange for money.

Just like many starters, you might have low capital to start it up, or you may want to test the waters. Whichever’s the case, this piece got you covered.

Insight Business: Easy Ways To Raise Startup Capital As An Entrepreneur in Nigeria

Table of Contents

What is a Small-scale Poultry Farming Business?

As the name implies, it is raising and selling birds and their byproduct on a low budget. This entails that a minimum labor force is required. In some cases where the number of birds is small, the need for extra hands might not be necessary. Immediate family members can aid in carrying out specific operations.

Poultry farming is considered small scale when the number of birds ranges from 50-500. There are about seven types of poultry farming in Nigeria, they include;

• Chicken (broilers and layers)
• Turkey (meat)
• Guinea Fowl (meat, egg, feathers)
• Geese (egg, meat, and feathers)
• Ducks (egg, meat, and feathers)
• Quail (egg and meat)
• Pigeon (meat)

Each of them has regions where they are in high demand. Of course, more than one can be in demand in the same area. All you need do is study the local market and access the demands for poultry and their current prices in your preferred location. You can indeed combine more than one type of poultry farming, but it is advised you have ample knowledge and experience before you venture into any poultry business.

Having more than two types can be confusing for a single farmer and a bit more stressful because different types of poultry have similar and distinct characteristics, diseases, and feed preferences, which you as a farmer should know well. If you have little to no knowledge about birds, their health, and their diseases, ensure you sort the help of experienced poultry farmers. Also, keep a veterinary doctor handy.

When deciding on the type of poultry farming to go into, you should think of the housing type that best suits your needs and budget. Some of the poultry housing systems include,

• Extensive poultry house system (allowing birds to roam)
• The semi-intensive system (partly intensive and partly free-range, this is commonly used by small scale farmers)
• Folding units poultry house system 
• Intensive poultry house system ( deep litter house system and poultry cage house system)

Click  here   to read more on the types of poultry house systems.

Insight Business: How to grow your business to dominate your industry

Essential things you need to start a poultry farming business in Nigeria

To start up your smalls scale poultry in Nigeria, you must secure land first. This can be a space behind your house or a different site altogether. The price of land varies in different regions and locations. A plot of land can be gotten between #600,000 to #2,000,000 in semi-urban areas.

In some rural areas, you can get lands for as low as #300,000 and more downward. The size of land should be dependent on the number of birds and possible future expansions.

This can be in the form of the simple construction of basic poultry structures, battery cages, free-range, depending on what is convenient and affordable for you.

Electricity

This is used for brooding, feeding, egg production, as so much more. 

They include feeding trough, drinking trough, shovels, buckets, etc.

Breeders who want to rear day-old chicks should spread cartons on the floor for the first several weeks. Many farmers cover the floors of their brooder pens with wood dust, but studies show that the dust particles are inhaled by the chicks, creating respiratory issues.

Wood Shavings

In the final phases of chicken production, you can use this as flooring. When soaked in poultry excrement, it becomes a high-quality manure that may be sold to crop producers.

Feed/ medicine

An integral part of poultry production. The type and quality of feeding determine production output. Vaccines and drugs for common diseases should be bought alongside bird feeds.

8 Steps to Start A Poultry Farming Business in Nigeria

Educate yourself/ choose the breed of poultry and poultry product.

As the saying goes, “when you fail to plan, you plan to fail. You cannot just jump into the poultry business or any other type of business without reasonable knowledge and skill of the industry. It’ll only lead you to failure and frustration.

As an aspiring poultry farmer, you need to learn and practice. You can do this either by going for practical classes in poultry farmlands or employing an experienced poultry farmer to put you through. However, you needn’t stop there. You can gather more knowledge from books, articles, and blogs related to your desired niche on your own.

Sourcing information from other poultry farmers and your local market can help you determine the type of poultry and poultry product to venture into. Doing these solidifies your ground and goes a long way to make your ride less bumpy.

Secure your capital

This might be your savings , a loan, grant, etc. This is what you’ll decide to start poultry farming business in Nigeria with. Securing your capital can be done before or after planning your business. Depending on what you want to achieve, you may decide to work according to your budget or source for capital above your budget.

Be strategic

The location of your farm, your target market, the breed of bird, and everything involved in your poultry business should be aligned to accomplish one thing: solving a problem in the area of the establishment and neighboring places. This is a critical factor because solving a non-existent problem or not covering a good number of demands leads to failure or low-profit margin.

Build your poultry pen/purchase equipment

By now, you are aware of the different poultry housings and systems. However, there is one thing you should know regarding long-term production expenses such as pens and poultry equipment: you should strive to build and purchase high-quality ones so they don’t break down or damage over time, causing you to spend additional money on things you might want to avoid.

You should also know that birds are susceptible to rodents, thieves, and animal attacks, including birds of prey. So during construction, ensure that every hole, nook, and cranny is blocked. Younger birds should not be left roaming. 

Your equipment should be cleaned regularly. For metal or zinc-made equipment, always keep them dry and away from bird poop to avoid rusting.

Buy good breeds of birds from trusted hatcheries and supplies

This is of massive importance, dear aspiring entrepreneurs. Your whole effort would be in futility when you buy weak breeds of birds. As a starter, you will indeed record colossal mortality. So I suggest you carefully seek proper guidance from experienced farmers.

Do not look at the price of birds and opt for cheaper ones, although that doesn’t determine the quality. It simply means that the costlier ones are in high demand, meaning that they have been tested and proven to be of more substantial breeds.

I’m not saying you shouldn’t patronize upcoming breeders, but you wouldn’t want to take careless risks as a beginner yourself. Oh, can’t there be massive mortality for more substantial breeds? You might ask. The answer is definitely! There is a possibility, but it now depends on your managerial practices. This is why you should back your knowledge up with guidance from experienced farmers.

Cultivate a good feeding and medication plan

You might decide to make use of local feeds for your birds to save money, fine. But for your tiny babies, ensure you give them quality feed for the first few weeks to strengthen their small bodies and prevent mortality. Then, even when they are bigger, try to supplement their feeding with balanced feeds, vitamins, and boosters.

Those who would want to maintain quality feeding throughout are good, but you should know that the feed price is high. Therefore, you should be careful when feeding your birds to avoid food wastage. Do not keep their feeding trough where they can topple it over or jump on top of it. The best thing is to keep it hanging from a string. 

For medication, always give proper vaccination to your birds and at when due. As a starter, involve a veterinary doctor or an experienced poultry farmer when doing it for the first few times. At least they will help you get vaccines and medications from trusted suppliers. In addition, you would be saving your birds from the chances of vaccine failure, which is extremely harmful to them. Vaccine failure might lead to stunted growth or massive flock clearance.

Employ good marketing strategies

Before sending off your goods to your target market, it is ideal to prepare your market for the arrival of your goods. This should be in the form of advertising your goods. Technology had made it possible for your goods to reach a wider community of consumers, so don’t just leave them on billboards and posters. Post attractive pictures of your birds and eggs on social media pages. 

When the above is accomplished, do not allow the trail to get cold. You will likely get a more significant number of consumers to purchase your goods when you make them available shortly after the advertisement. This doesn’t mean you should stop advertising when your goods are ready for consumption. Instead, make it a routine to increase the consistency of your awareness creation during marketing. This will create a pattern that your customers would recognize.

Did you know that whatsapp is a good place to market your business, regardless of what you sell? Send a message to get our detailed whatsapp marketing course to increase your sales today.

Another good marketing strategy is making your birds readily available during festive seasons. This means that from the time of purchase of birds to the time of maturity should be calculated well. This will help you sell out your birds. This strategy would as well increase your customer base.

For farmers raising minor birds, you should avoid selling your goods to wholesalers because this will surely leave a good percentage of your profit to them.

Business: How to start a waste management business in Nigeria

Be committed and disciplined

It would be best if you cultivated this habit in all your dealings. Raising birds can be difficult and time-consuming, especially at their tender age. Also, there is the fact that you might get a couple of mortality at different stages. These things happen. Losing a bird or two is inevitable; losing 10 to 20 or more is likely.

But no, don’t be scared to take that step. The benefits are massive. However, just like every good thing, hard work, commitment and dedication are the backbones. Securing a good breed is not nearly enough. Seeing to it that you pay close attention to your business is of the utmost priority. It ensures lesser mortality and higher output. 

There you have it; these are the basis to start poultry farming business in Nigeria.

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About the Author

Maryjane C. Chiedozi, a writer with an untamed passion for creativity, research and productivity, all put together to create masterpieces. Maryjane C. Chiedozi is also an author of the novel ‘Our Hearts Beat For Anne’ which can be read exclusively on GoodNovel.

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How To Start A Profitable Poultry Farming Business In Nigeria (2023)

Poultry farming can be defined as the process of raising various domestic birds like chicken, turkey, emu, ducks, geese, etc. for their eggs or meat. This has been a common practice in Nigeria for such a long time that it has become an indispensable part of the farming and agriculture system.

Poultry farming could be considered as one of the most lucrative agricultural business ideas  in Nigeria today. It requires not huge capital to start as you can start from the comfort of your house if you have enough space to take the number of birds that you desire.

Poultry Farming In Nigeria

The demand for livestock products, including poultry, is fast expanding in Nigeria and across Africa as a result of population growth and increased urbanization. Poultry farming is one of the fastest growing segments in the Agricultural industry in Nigeria. According to ThisDay Newspaper , Nigeria’s poultry industry is worth over N1.2tn as of 2017.

From a market size perspective, Nigeria’s egg production is the largest in Africa followed by South Africa. Chicken importation (with the exception of day-old-chicks) was banned by Nigeria in 2003, which spurred growth in domestic poultry production. The Nigerian poultry sector is extremely fragmented with most of the chicken raised in ‘backyards’ or on poultry farms with less than 1,000 birds.

Amongst all kinds of poultry farming (chickens, turkeys, geese, and ducks), chicken is the most common one as farmers get a great number of chickens regularly either the egg for food or the farming meat. The high consumption of the end product; chicken and egg are in constant demand in the marketplace and even at various homes in Nigeria today and this makes poultry farming very lucrative as it seems to be a potent source of animal protein outside fish, pork and beef.

Also Read: How To Make Money Starting A Snail Farming Business In Nigeria .

5 Steps To Starting A Poultry Farm In Nigeria

Are you planning to start your own poultry farm? If so, then you should enter the business well prepared by considering all of its aspects. Right from setting up some basic equipment to raising the birds and marketing your business, you have to take every step wisely.

Poultry farming is of different types such as duck rearing, rearing chicken, quails, turkey, emu, broiler, etc. However, the principles and practices underlying are the same. Below are the five basic steps you need to follow to start a profitable snail farming business in Nigeria.

Step 1 – Choose The Type Of Poultry Bird To Rear

Before you kickstart your poultry farming business venture, it is important to have a clear picture of what type of poultry breeds to farm (most importantly, poultry breeds that lay a lot of eggs ). In Nigeria today, aside from locally grown chickens, there are two major breeds that are common among poultry farmers.

Broilers: Young males and Females raised for meat. They grow from a hatch weight of 40 g to a weight of approximately 1.5 to 2 kg within 6 weeks only.

Layers: Hens used for commercial egg production and then killed for meat. Layer chickens are raised from one day old. They start laying eggs at the age of 18-19 weeks and continue until they are 72-78 weeks of age.

Cockerels: Just like the broilers, cockerels are also for meat production and have a special market demand but then, its growth is very slow, unlike the broilers that grow very fast. Cockerels can survive in many environments.

Step 2 – Select A Suitable Farm Location/Site

Where your poultry farm is situated is very important for your business. To start poultry, you need a farm site. The size of the poultry farmland should be determined by the number of birds you want to rear. If you have enough land at your backyard and can’t afford to acquire a new site, its always better to start small. You can start with what you have but make it a priority to get a better farm as soon as you can afford it.

A good poultry farm site should be away from the chaos and hustle-bustle of the city. It should be calm and pollution free environment. The farm must have adequate, clean and fresh drinking water sources nearby. Also, the site must be free of poultry enemies and predators like foxes and leopards. The site must be easily accessible from main roads so as to ease the transportation of farm products when they are ready for sale.

Step 3 – Provide Good Housing And Shelter For The Birds

When it comes to poultry farming, housing is the next important factor after getting a farm site. A proper poultry housing is necessary for the protection and survival of your commercial poultry birds. The Housing system you choose totally depends on the poultry breeds and farming method. Housing design varies in accordance with various types of poultry raising methods.

The housing to be built should be spacious enough to permit free movement and running of the birds. shelters must be raised adequately to prevent the risk of flooding. It should be spacious enough to permit free movement and running of the birds. In addition, the shelter must be adequately ventilated and protected from sunlight.

Also Read: How To Start Your Own Real Estate Business In Nigeria .

Step 4 – Feeding and Medication  OF The Poultry BIRDS

For commercial poultry production, good quality, highly nutritious food is a must. Quality and neat feeds keep the bird healthy always and very productive. The feed must be kept clean and dry always, as contaminated feed can infect poultry. Fresh quality and nutritious food is the key to success in poultry farming business. Your birds need not lack water. Lack of adequate water supply can impede their growth.

Proper medication and vaccination can prevent many poultry diseases. As a commercial poultry farmer, you need to have a veterinary doctor that can come run a check on your birds when the need arises. There are various routine medications and vaccinations that help towards the healthiness of your birds to keep them safe from viruses and bacterial infections, peradventure they catch an infectious disease.

Step 5 – Marketing and Sales of  THE POULTRY  Birds

Poultry farming is a profitable business and the desire of every poultry farmer is to make good sales after every harvest. So you need to pay attention to the marketing and sales aspect of your business . Do not be caught up in the operational aspect of your business so much that you ignore the sales aspect.

Nevertheless, the following ideas can help you in the marketing and sales of your chicken; taking your business online, selling to hotels and restaurants, advertising your products, employing marketers, home delivery, etc.

Cost of Starting A Poultry Farming Business

Many new businesses require a large capital outlay, which is not within reach of most business owners. A typical startup business also takes a long time to produce a return on your investment. By contrast, a small-scale poultry business has a relatively low start-up cost and rapid returns.

You can begin with as little as N50,000 (which basically to covers the cost of buying the day-old chicks and feeding them) and get a 100% return on your capital investment within six months. And because chicks take only 21 days to hatch, you can start generating an income just three weeks after starting. No other business can provide such a quick turnaround.

Commercial poultry farming in Nigeria has created and still creating a profitable business opportunity for Entrepreneurs and can provide a great employment source for job seekers. Most entrepreneurs prefer to produce day-old chicks and sell them to growers, as this option is easier and less risky. The choice, however, is up to you.

As a business owner, you need to get your business finances right from the onset and at the heart of these viable business opportunities in poultry farming are platforms, such as our online invoicing software that helps you keep proper track of your business revenues and expenses with ease.

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Poultry Farming in Nigeria: How to Get Started

Nigerians love poultry meat, it is the third most consumed meat in Nigeria, after beef and goat meat, reports indicate that Nigerians consume over 1.5 million tons of poultry meat annually , and the demand for poultry eggs and meat continues to rise steadily. However, local production of poultry in Nigeria only meets about 30% of demand, while poultry imports meet up the rest of the demand. This clearly indicates that poultry farming in Nigeria is a highly lucrative field of agriculture that is still largely under-exploited in Nigeria. Thus, if you are thinking of starting a career in agriculture , you should definitely consider poultry farming. 

Poultry farming refers to the raising of domestic birds like chicken, turkey, ducks etc for the purpose of producing meat, eggs, feathers and manure for human consumption and other purposes. It is a highly profitable venture with a lot of exciting opportunities, and if done right, you’ll be killing two birds with one stone– you will make a lot of profit due to high demand for poultry meat and eggs in Nigeria, and you’ll also be doing your part to ensure that local production of poultry meets demand, thus minimising importation of poultry products. If you want to get more insights about the facts, figures and statistics about poultry farming in Nigeria, read this blog post .

Continue reading this blog post if you want to learn about how to get started with poultry farming in Nigeria. It contains everything you need to know about starting a poultry farm in Nigeria.

HOW TO GET STARTED WITH POULTRY FARMING IN NIGERIA

• Learning About the Cost and Creating a Budget
• Choosing the Type of Bird to Rear

Selecting A Suitable Farm Location for Poultry Farming in Nigeria

Free-range poultry housing system, semi-intensive housing system, folding unit system, intensive system.

• Feeding And Caring for the Birds
• Marketing And Selling the Birds and Their Products

Learning About The Cost And Creating A Budget

The cost of starting and operating a poultry farm depends on the size of the farm and the scale of operations. A small-scale farm requires less capital due to the low cost of housing and feeding involved. Large scale poultry farms require well-constructed housing systems, large quantities of highly nutritious food and appropriate measures for disease and pest control which can be quite expensive. Before starting a poultry farm, decide the kind of farm you want to start, find out the cost of everything you need to start the farm and create a budget accordingly. You can start a small-scale poultry business in Nigeria with less than N100,000. Medium to large scale farms require a lot more money, but it is advisable to start small even if you have more than enough funds to spare.

Choosing The Type of Bird to Rear

The most common birds raised by poultry farmers today include chicken, turkey, geese, quail, pigeon and guinea fowl. However, chicken remains the most widely consumed bird in Nigeria, making it a suitable choice for farmers who want to take advantage of the growing demand for poultry meat and eggs in Nigeria, Turkey is a close second. However, if you prefer a niche market with less competition, you can consider rearing quails, pigeons or ducks. 

After deciding the type of bird, you want to rear, the next step is to identify the different breeds of the bird available and choose the most profitable breed(s) for your farm. For instance, if you decide to start rearing chickens, you can choose to raise only broilers, layers, cockerels or a mixture of all the different breeds. Broilers are young males and females raised for the sole purpose of providing meat, cockerels serve the same purpose but they grow at a slower pace than broilers. Layers are considered valuable and highly profitable because they provide both eggs and meat. Once you have decided the breed(s), you can now decide on a suitable location for your farm.

To start a poultry farm, you need a suitable farm site. Ideally, poultry farms should be situated far away from residential buildings due to the offensive odour that typically emanates from them. However, If you cannot afford to acquire a new site, you can start with any available space in your place of residence, but as your poultry farm expands and demands get higher, you will need to move your farm to a new site. 

If you can afford a new site away from your place of residence, select a location that is calm and free of pollution, predators and other threats. Also, ensure that the location is close to a good water source, if you cannot afford to install a borehole on your farm, to ensure an adequate supply of clean water to the farm. A good poultry farm should also be easily accessible, it should be situated in a location with good roads, to ensure easy transportation of farm products when they are ready for sale.

Providing Good Housing Or Shelter For poultry farming in Nigeria

To keep your birds, secure and safe, you must create a good shelter for them on the farm site. There are four major housing systems in poultry farming; The free-range or extensive system, the semi-intensive system, folding units’ system and the intensive system.

This is the oldest system of housing birds in poultry farming. In this system, the birds are allowed to roam freely around the farm during the day and are kept in a shelter at night. The shelter is usually provided by temporary roofing supported by ordinary poles. The free-range system is perfect for new poultry farmers because it requires less capital investment than other housing systems. It minimises not just the cost of housing construction, but also the cost of feeding the birds as this system allows them to get most of their food by searching around the farm. The major disadvantage of this system is that it may lead to loss of many birds due to exposure to predators, contaminated food and other dangers they may encounter while roaming around the farm.

This type of housing system is partly free-range and partly intensive. In this system, a small land surrounded by a wire mesh is attached to a poultry house. The small land area is called a run. The birds spend the daytime in the run and take shelter in the poultry house at night. 

This system also comprises a poultry house attached to a run but the space requirement is less and the total poultry unit can be shifted from one place to another.

This system is the most suitable and efficient housing system for large scale poultry farming. Commercial poultry farming is done only with this system. There are different types of intensive poultry housing systems:

• Deep litter system
• Slatted or Wired-floor system
• Combination of the slatted floor and deep litter system
• Cage system or Battery system

The intensive poultry housing system enhances productivity in many ways. It makes day-to-day management easy and the birds tend to save more energy because of the restriction of their movement. With this system, you can easily and accurately apply scientific management practices like breeding, feeding, medication and culling. This system also makes it easy to identify, isolate and treat sick birds, thus preventing disease outbreaks in the farm. The major disadvantage of this system is the high cost of construction and day-to-day management involved.

Feeding And Caring For The Birds

In order to attain maximum productivity, you must ensure that the birds in your farm receive adequate nutrition, care and medication when necessary. The birds must be fed with good quality food and clean water daily. Poultry feeds are usually in three forms: Crumbles, Pellets & Mash. Maize and soybean are the most common feed given to poultry in Nigeria and they are a cheap source of energy and protein respectively for your birds. There are other feeds which you can add to their nutritions such as balancers, concentrates, millets, fish oil and more. You can get all these from poultry feed companies.

If you are rearing chicks between 0-4 weeks old, you will want to get a starter feed or starter mash.

To prevent disease outbreaks, the poultry house must be kept clean and dry at all times, and measures such as vaccination and medication should be taken when appropriate.

Marketing And Selling The Birds And Their Products

Poultry farming in Nigeria is known to be very profitable, thus, many go into poultry farming with the sole aim of making money or profits. The cost of running a poultry farm in Nigeria can be very high, thus, if marketing is not done properly, the farmer may incur enormous losses that will cause the business to crumble. Do not be caught up in the operational aspect of your business so much that you ignore the sales aspect. You can advertise your business online through your social media accounts, WhatsApp status and groups, employ marketers, sell to hotels, restaurants and event caterers. If you run a small-scale poultry farm, inform friends, relatives and neighbours that you sell poultry meat and eggs. Also, try to boost your sales during festive seasons by giving discounts, encouraging referrals, offering home delivery etc.

Although the demand for poultry is high in Nigeria, not every poultry farmer will find success. Running a successful poultry farm can be very challenging, it requires adequate knowledge, finance, patience, attentiveness and good marketing skills. Before venturing into poultry farming in Nigeria, consider the cost involved, acquire extensive knowledge about the business and plan well. 

In 2021, Babban Gona supported over 40 poultry entrepreneurs to successfully raise over 40,000-day-old chicks across 10 cycles. 

You may also be interested in:

Farming in Nigeria: How to get Started. Maize Farming in Nigeria: How to get Started.

1 thought on “Poultry Farming in Nigeria: How to Get Started”

Is a very good initiative by Babban gonna Keep up the good job you have started. More grace to you. How can one be engaged as your poultry Enterprise?

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Business Plan For Poultry Farming In Nigeria

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Table of Contents

Introduction

So you’ve decided to start a poultry farming business in Nigeria, good for you. The question is how important is a business plan for poultry farming? The fact that you’re reading this right now means that you understand how important a business plan is for your business to succeed. While you may want to quickly hire someone to do it for you, which is usually quite expensive, there’s nothing like taking your time to write one by yourself.

This is because no one knows what you want for your business better than you. Even more, this would help you save costs by reducing your expenses. You might be skeptical about writing a business plan all by yourself because you know next to nothing about all the processes involved.

Well, fortunately for you, this blog post is meant to guide you every step of the way. With the right guidelines and in-depth research into the business, you should have a fail-proof and detailed business plan for your poultry farming business in Nigeria. Consequently, helping you start and run a successful poultry business.

Poultry Farming Business Overview

Before discovering how to prepare a solid business plan for poultry farming, there are some nitty-gritty details you need to understand about the poultry business and business generally.

Hence, let’s discover what these are.

First, you need to understand what your business idea is all about.

So, what is poultry farming? Poultry farming involves raising domestic birds such as chickens, turkeys, ducks, and the rest for commercial or subsistence purposes. Poultry farming becomes a business when you raise these birds for commercial purposes.

Since you’re thinking of creating a business plan, it’s clear that you’re raising the birds for commercial purposes. 

It’s no news that poultry farming is one of Nigeria’s most lucrative and evergreen business ideas. This is due to its large and ever-growing market size because many poultry products (meat and eggs) are consumed by thousands of Nigeria, with Nigeria being one of the largest producers of eggs (poultry products)  in the whole of Africa.

No doubt you can successfully run a poultry farming business in Nigeria and make profits as long as you go about it the right way.

Secondly, you need to do proper research on your business idea . 

Before you set out to start any business, you need to do some research about the business. It’s not enough to have a business idea. You also need to validate that business idea if you want to stand a better chance of succeeding in that business.

Hence, for your poultry farming business idea, what are the possibilities of the business succeeding in Nigeria? Can you say that the business idea is viable?

To discover all these details about your business idea, you need to do a feasibility study of your business idea.

Feasibility studies is all about determining the viability or profitability of a business. It involves carrying out in-depth research and analysis into all aspects of the business industry you intend to start. Both feasibility studies and business plans are essential for the success of your poultry business.

Furthermore, after carrying out a feasibility study of your poultry farming business idea and establishing that it’s a profitable venture, only then can you proceed to write a business plan.

Here are some of the reasons why you should carry out a feasibility study for your business;

• It’s necessary for understanding all aspects of the business, such as the financial, physical, technical, and human resources requirements for your business.
• It would help you identify potential risks and challenges associated with your business venture.
• Feasibility studies will help you decide if a business is worth your efforts after considering some of the factors above and more.
• It would help you to determine your business goals and objectives.
• Overall, a feasibility study will help you come up with a solid plan for your business.

Now that you know some of the reasons you should do a feasibility study for your poultry farm business in Nigeria go ahead and do one for your business.

After in-depth research into the poultry farming business industry, here’s a breakdown of the essential elements your feasibility study should include;

• An Executive summary of the business : this is a brief description of every aspect of the business.
• Technological requirements and considerations : This should explain the business’s technological needs, if you have and if not, how you plan to get it, and the costs involved.
• Insights on the Market place for the business
• Marketing strategies
• Required human resources for the business
• Expected timelines for business operations and activities
• Capital or financial requirements
• Overall findings, verdict, recommendations, and plans of action

Another thing you need to consider before writing a business plan for your poultry farming business is to decide your focus area.

The poultry farming business industry is large. It involves a lot from rearing poultry birds to egg production, feed production, and more. Hence, you need to be specific about what your business focus area will be. That is if you’ll be focusing on one or all aspects of the business.

If you’re focusing on all aspects of the business, you also need to decide what you’ll be starting with and at what stage you’ll implement the other aspects of the business.

Similarly, if your focus will be on the rearing of poultry birds, for example, chickens, you need to decide what bread of birds you’ll be rearing. There are different breeds of birds such as broilers, layers, etc.

Each breed has its advantages, downsides, and maintenance cost. Hence, based on what your research reveals and what you want for your business, decide which will be best for you.

Lastly, other factors you need to consider before writing your poultry farm business plan include;

• Poultry farm business location (Urban or rural area)
• Capital sources: Personal funding, SME, loans, grants, or investors funding
• Sole proprietorship or Partnerships

Overall, these are vital factors that can help you decide what you want for your business; hence the need for you to consider them before starting your poultry farming business plan.

After observing the following steps above, you’re now ready to craft a business plan for your poultry farming business idea.

Now, let’s discover the necessary steps to writing a good business plan.

First, what is a business plan?  

A business plan is a blueprint for how you intend to run your business. It covers many aspects such as business goals, vision, and mission statement, guiding principles, target market analysis, business operation analysis, marketing strategies, etc.

It contains everything about the business, from the conception of the business idea to your plan of action, and the execution of those plans. There are two reasons why you would write a business plan. The first reason is what we’ve discussed above.

The other reason is to secure investment funding. In this case, your business plan will not just serve as a blueprint specifying how you want to run the business. Rather, it also has to convince potential investors that your business will be worth their investments.

Hence, your business plan for poultry farming has to be backed by facts, data, and statistics that prove the profitability of the business.

Given this, here’s what an ideal business plan should look like.

Components of the Business Plan For Poultry Farming in Nigeria

• Executive summary : An overall summary of the entire business plan. This is the first page of your business plan. It is usually written last after every aspect of the business has been covered in the business plan. However, some people chose to write it first. Choose whichever way works for you best.
• Business Mission Statement : This covers the specific goals you want to achieve with your poultry farming business. The mission statement should be tailored towards solving an existing problem in the poultry farming industry and how your business will be the answer to that problem by meeting your target customers’ specific needs.
• Business Vision : This covers the kind of poultry farm business and working environment you aim to establish and the beliefs that gave birth to that vision.
• Objectives of the business : This is what you aim to achieve in the business on a short and long-term basis.
• Core Values & Guiding Principles: These are the beliefs and ethics that will guide all business activities and relationships with your customers.
• Keys to success/Business strategies: These are specific activities and strategies that would be implemented to ensure the business’ success.
• Products and services description: This should describe the products and services you’ll be offering once the business is established.
• Cost of Operation/Financing: This covers the cost of running the business and how you plan to get the required financing. It should also cover investors’ equity if you’re seeking investment funding.
• Company Location/Facilities and Equipment: Here, you’ll state where the business will be located as well as the required facilities and equipment.
• Potential risks and Mitigation Strategies: This should cover potential risks associated with the business and your strategies for mitigating those risks.
• Target Market Analysis: This will contain details on the size of your target market, their buying power, and their demographic details.
• Sales and Marketing Strategies and Implementation process: This section should capture how you intend to make sales in the business through proven and tested marketing strategies.
• Management, staffing, and operations/Chain of leadership: This should capture details about the workforce of the business as well as the order of management or chain of command.
• Conclusion: A recap of everything captured in the business plan.

Conclusion on The Business Plan For Poultry Farming in Nigeria

On a final note, it’s important to state that a business plan is different from a business proposal as many people tend to confuse these two documents to mean the same thing. While a business plan is a detailed document describing a business and its strategic plans for operating a business proposal is written solely for sales purposes.

A business proposal is a document describing the unique products and services of a business to a potential client convincing the client how the business’s products and services will add value to them.

An example of this is a document written to a restaurant owner, telling him or her of the quality of your poultry products and how you’re offering them at a reasonable price range.

Now you have the necessary information you need to draft a solid business plan for your poultry farming business in Nigeria. Good luck to you as you start your poultry farm business .

[…] A poultry farm business plan is a detailed document containing information on how you intend to run the business. […]

[…] can write your business plan yourself or pay a professional to do the job for […]

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How to Start a Profitable Poultry Farming Business in Nigeria

So you want to start a poultry farming business in Nigeria? Excellent, you’ve come to the right place. Poultry farming in Nigeria can be an extremely lucrative business if you know what you’re doing. The demand for poultry products like eggs and meat is huge in Nigeria due to the large population. But to run a successful poultry farm, you need to understand how to raise healthy chickens, build proper housing, obtain the necessary pieces of equipment, and find customers to sell your products.

This article will walk you through the essential steps to starting your own profitable poultry farming business in Nigeria. By the end, you’ll have a solid plan to get your poultry farm up and running. Let’s get started!

What is Poultry Farming?

So, what is poultry farming? Poultry farming simply refers to raising chickens, ducks, turkeys, and other domesticated birds for the purpose of producing eggs, meat, or both. In Nigeria, poultry farming has become very popular and profitable. Many people are venturing into it as a way to earn an income and provide jobs. Many farmers are earning ₦500,000 per month or more from selling eggs and broilers.

So if you’re looking for a new business opportunity, poultry farming in Nigeria could be ideal. With hard work and the right skills, you’ll be well on your way to building a successful poultry farm.

Poultry Production Methods in Nigeria

Intensive and extensive are the two main methods of poultry production in Nigeria.

Intensive poultry production means keeping large numbers of birds together in a confined area. This method requires close monitoring and control. You’ll need to provide proper housing, ventilation, temperature control, and high-quality feed. While intensive production requires less capital and management, it leads to lower quality eggs and meat due to the stressful living condition but higher profits.

Different types of intensive poultry farm systems include;

• Cage system or Battery system
• Slatted or Wired-floor system
• Deep litter system
• Combination of the slatted floor and deep litter system

Extensive poultry production means allowing birds to roam freely during the day with minimal confinement. This high-cost method is good for rural farmers. You’ll need plenty of land, simple housing for protection, and workers to herd the birds. The quality of eggs is higher but has lesser profits due to the high cost of production.

What is the Cost of Starting a Poultry farming business in Nigeria?

With less than N150,000, you may establish a small-scale Poultry farming business in Nigeria. Medium to large-scale farms require a lot more money, but establishing a small poultry business is recommended even if you have plenty of money to spare.

When starting a profitable poultry farming business in Nigeria, proper planning is crucial for success. It sets the foundation for a well-organized and efficient operation. By carefully considering all aspects of your poultry farm, you can maximize productivity and profitability.

Learn about Poultry Farming

To get into poultry farming in Nigeria, you need to understand what it entails. Some key things to know:

• Learn about the different types of poultry.
• Know how to properly house and feed them.
• You’ll need to construct a poultry house and equip it with feeders, drinkers, perches, nests, etc.
• Understand poultry diseases and treatment.
• Learn how to incubate eggs and hatch chicks.
• Find out how to market your products.

Continuously improve your knowledge. Take courses on poultry farming, follow expert advice, and stay up-to-date with advancements in techniques, medications, and technologies to maximize productivity.

Poultry farming can be very rewarding, but you must be fully prepared for the demands of managing a successful operation. Do your research and get the necessary training to understand what the business entails before jumping in.

Conduct a Market Research

When starting a profitable poultry farming business in Nigeria, it is crucial to conduct thorough market research. Understanding the demand and competition in the poultry industry will give you a competitive edge and increase your chances of success.

Market research allows you to identify your target audience, their preferences, and their purchasing power. This information will help you tailor your poultry products to meet their specific needs, ensuring customer satisfaction and repeat business.

Additionally, market research enables you to analyze existing poultry farms in your area and assess their strengths and weaknesses. By identifying gaps in the market, you can position your poultry farm as unique and offer products that stand out from the competition.

Develop a Business Plan

A well-crafted business plan is the foundation of a profitable poultry farming business. It serves as a roadmap, guiding you through the various stages of establishing and running your farm. Start by outlining your goals and objectives, then determine the scale of your operation. Consider the initial investment required, including the cost of land, infrastructure, equipment, and livestock.

Next, create a detailed financial plan that includes projected expenses and revenue. This will help you estimate your breakeven point and set realistic pricing for your poultry products. Additionally, you can explore potential sources of funding, such as loans or grants to support your venture.

Choose Your Poultry Sector/Niche

There are four main types of poultry farming you can consider in Nigeria:

Layer breeding focuses on egg production. Layers start laying eggs between 18 to 22 weeks of age and can continue for 12-18 months. Popular breeds are Isa Brown, Bovans, and Dominant.

Broiler breeding focuses on meat (chicken) production. Broilers have a fast growth rate and are ready for harvest in about 8 weeks. Popular breeds are Arbor Acres, Ross, Cobb, and Hubbard.

Egg and meat processing involves collecting, grading, packaging, and distributing eggs and chicken meat to markets, retailers and consumers. This requires proper handling, storage, and transportation facilities.

Hatchery operation focuses on breeding and hatching layers and broiler chicks to supply poultry farms. It requires incubators, hatchers, chick boxes, and vaccination equipment. Popular breeds for hatching are mentioned above.

Within these types, you can specialize in free-range organic poultry farming or concentrate on a particular product like eggs, broiler meat, or day-old chicks. Choose an area you have experience in or are passionate about to start your profitable poultry business in Nigeria.

Choose the Right Breed of Poultry Bird for Your Farm

When starting a profitable poultry farming business in Nigeria, it is important to choose the right breed of poultry bird for your farm. Aside from chickens, which are the most common poultry bird that people invest in, and the most consumed bird in Nigeria, there are several other types of poultry birds you can grow.

Here are six distinct varieties of poultry birds that you can invest in as a farmer:

• Ducks (for eggs, meat, and down feathers)
• Turkeys (mainly for meat)
• Geese (for eggs, meat, and down feathers)
• Guinea Fowl (for eggs and meat)
• Quail (for eggs and meat)
• Pigeon (mainly for meat)

After you’ve decided on the type of bird you wish to raise, the next step is to identify the many varieties of birds available and select the most profitable breed(s) for your farm. If you decide to start raising chickens, you can opt to grow only broilers, layers, cockerels, or a mix of all breeds.

Remember, conducting thorough research and understanding the specific needs and characteristics of each breed will help you make an informed decision for your poultry farm.

When selecting a poultry breed for your farm, consider factors such as climate, production purpose, growth rate, disease resistance, and market demand. By choosing the right breed, you can maximize your farm’s profitability and ensure the success of your poultry farming business in Nigeria.

Select a Suitable Location for Your Poultry Farm

Choosing a suitable location for your poultry farm is critical to its success and profitability. Some key factors to consider:

Access to resources

Select a spot with easy access to feed, medication, equipment and other supplies. Being close to the main roads and suppliers will reduce costs and time.

Water supply

An abundant, clean water source is essential. Lack of water will severely limit your production. Boreholes, wells or municipal water connections are good options.

The area should have a warm and humid climate ideal for poultry production. Extreme heat or cold requires additional costs for cooling, heating and ventilation.

The soil should be able to support the weight of buildings and equipment. Sandy-loam soil with good drainage is best. Avoid swampy, rocky or steep areas.

Choose a location away from residential areas to avoid noise and odor nuisance to neighbors, which could lead to issues down the road.

Select an area that is secure from theft, predators and harsh weather events. Fencing, lighting and possibly security guards may be required.

Growth potential

Pick a spot that allows for business expansion as your farm grows. Extra space for more chicken houses, egg sorting or processing facilities, staff housing, etc.

Availability of utilities

Ensure there are utility connections for electricity, water and possibly natural gas on site or nearby for powering equipment, lighting, heating, etc.

Choosing a strategic location by evaluating these key factors will set your poultry business up for success from the start. Do your research, plan well and choose wisely!

Housing and Equipment: Providing Proper Shelter and Supplies for Your Birds

When starting your poultry farm, providing proper housing and equipment for your birds is essential.

You’ll want to consider several options for sheltering your flock:

• Cages: Wire or slatted floor cages are common for egg-laying hens or broiler chickens. Cages allow droppings to fall through, keeping birds clean.
• Battery cages: Similar to cages but stacked in columns and rows. Allows for a large number of birds in a small space but can limit movement.
• Floor pens: Open pens with litter (wood shavings, rice hulls) allow birds to move freely. More space is required, and droppings must be removed regularly.
• Free range: Birds have access to outdoor pens and coops. More natural but requires more space and may lead to loss from predators.

In addition to shelter, you’ll need equipment like:

• Feeders and waterers: To provide food and hydration for your flock.
• Nesting boxes: For egg-laying hens.
• Incubators and brooders: To hatch and raise chicks.
• Egg trays: For collecting and transporting eggs.
• Catching nets: To capture birds when needed.
• Crates: For transporting or isolating birds.
• Perches: For egg-laying hens to roost on.
• Fencing: To enclose outdoor areas.

Having the proper housing, feeders, waterers, incubators, and other essential equipment will help ensure your poultry business is profitable and sustainable in the long run. Providing good living conditions and quality care for your birds will lead to healthier, more productive flocks.

Feeding and Medications of Your Poultry Birds: Nutrition Requirements and Best Practices

The nutritional needs of your poultry birds depend on factors like age, breed, environment, and purpose (meat or egg production). Generally, poultry feed contains grains like corn and soybeans, along with added vitamins and minerals. For chicks, provide chick starter feed which has extra protein to support growth. After 6-8 weeks, switch to chick grower feed. For egg-laying hens, use layer feed with lots of calcium.

Provide clean, fresh feed and water daily. Place feeders at beak height and check that all birds can access them. Offer oyster shells, grit, and fresh greens for extra nutrition. Monitor your birds closely for signs of malnutrition, like feather plucking or bone weakness.

Medicating your flock may be necessary to prevent disease or treat infections. Work with an avian vet to develop a schedule for deworming, vaccinating, and administering medications. Only give medication specifically prescribed for poultry to avoid toxicity. Isolate and closely monitor any sick birds to provide prompt treatment.

Following recommended best practices for feeding, housing, and medicating your poultry flock will keep them healthy, productive and generate the highest profits. Paying close attention to the specific needs of your birds at every stage of growth and production is key.

Market Your Poultry and Products for Maximum Profit

Marketing your poultry and products is key to running a profitable business. You need to get the word out about your farm and products to build a customer base.

Advertise on local radio stations, in newspapers, and on community Facebook groups and websites. Explain you sell fresh, locally-raised chicken and eggs. Offer promotions and discounts to attract new customers.

Build a Website

Create a simple website to tell people about your farm, products, and mission. Share photos of your happy chickens and farm. Allow customers to order online for pickup or delivery.

Farmers Markets

Sell at local farmers’ markets and allow people to see and experience your high-quality products. Offer free samples and recipes. Engage with customers to build loyalty.

Restaurants

Approach local restaurants about supplying them with fresh chicken and eggs. Chefs and diners will appreciate locally-sourced, farm-fresh ingredients. Build strong relationships with restaurants and offer discounts for bulk orders.

Social Media

Start social media profiles for your farm on Facebook, Instagram, Tiktok, Thread and Twitter. Post regularly about daily life on the farm, new products, promotions, recipes, and more. Engage with followers and build an online community. Social media is an easy, low-cost way to raise brand awareness and connect with customers.

Following these steps to actively market your poultry farm and products will set you up for success and maximum profitability. Get out there and spread the word about your amazing, farm-fresh chicken and eggs!

Good Husbandry Poultry Practices for Poultry Farmers in Nigeria

To ensure healthy, productive poultry, there are several good husbandry practices Nigerian poultry farmers should follow:

• Provide clean, spacious housing. Coops should be thoroughly cleaned and disinfected regularly to minimize disease. Allow at least 2 to 3 square feet of space per bird.
• Supply fresh, nutritious feed. Offer pelleted feed formulated for your birds’ age and species. Also, provide clean, fresh water daily.
• Maintain a regular lighting schedule. Most poultry require 12-16 hours of light per day to remain productive. Use timers to keep the schedule consistent.
• Check birds daily. Closely monitor your flock for signs of illness or injury. Address any issues quickly to keep the flock healthy.
• Control pests and predators. Use wire mesh or netting to keep out wild birds, rodents, and other threats. Practice good sanitation to limit infestations.
• Keep accurate records. Note details like egg production, mortality, feed intake, and medical treatments. Records help identify problems and maximize productivity.
• Provide nesting boxes. For egg layers, place one nest box for every four hens. Nest boxes encourage hens to lay eggs in a confined area.
• Collect eggs frequently. Gather eggs at least once per day to keep them clean and prevent hens from eating them.
• Practice biosecurity. Limit visitors and thoroughly clean equipment, shoes, and clothes when entering or leaving the coop to prevent disease transmission.
• Vaccinate and deworm regularly. Follow a schedule recommended by a vet to protect the flock.

Challenges Associated with Poultry Farming in Nigeria with their solutions

Poultry farming in Nigeria faces several significant challenges, such as:

High cost of feed

A commercial feed can make up 60-70% of total costs. Look for cheaper alternative feed sources and join cooperatives to buy in bulk. You can as well consider formulating your own feed using locally available ingredients or exploring alternative feed sources. Additionally, proper storage and handling of feed can prevent wastage and ensure its quality.

Avian influenza, Newcastle disease, and fowl pox can spread rapidly and kill entire flocks. Practice good biosecurity; it is crucial to stay informed about the latest disease trends and take proactive measures. Regular vaccination and deworming, alongside proper quarantine procedures for new birds, can significantly reduce the risk of disease transmission.

Lack of funding

Many small farms struggle to access loans and grants. Develop a solid business plan and build relationships with microfinance institutions. Farmers should actively seek partnerships with microfinance institutions that specialize in agricultural financing. Building relationships with these institutions can increase the chances of securing loans and grants to expand your operations.

Inadequate knowledge

Many farmers lack training in proper housing, feeding, and healthcare. To overcome the lack of knowledge in poultry farming practices, it is important for farmers to prioritize continuous learning. Seek out training programs and workshops that provide insights into efficient housing, feeding, and healthcare practices. Embracing new technologies and staying updated with industry advancements can further improve productivity and profitability.

Protecting your flock from predators is crucial for maintaining a healthy and productive poultry farm. Implement measures such as installing sturdy fencing, using netting to cover open areas, and constructing protective shelters. Regularly inspect your farm for potential entry points and promptly address any vulnerabilities.

Lack of infrastructure

Inconsistent power supply and poor road conditions hinder business growth. Invest in alternative energy sources and coordinate with local government on infrastructure improvements.

By addressing each challenge proactively and persistently, poultry farming in Nigeria can become more sustainable and profitable. With improved practices, funding, and policy changes, the industry has the potential for huge growth.

Commercial poultry farming in Nigeria has produced and continues to create a profitable business opportunity for entrepreneurs as well as a good source of employment for job seekers. The majority of entrepreneurs prefer to raise day-old chicks and sell them to farmers since it is easier and less hazardous.

To ensure the profitability and sustainability of your poultry farm in Nigeria, you need to follow the steps stated above and learn more from professionals in the industry.

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How to do a Business Proposal on Poultry Farming in Nigeria

Embarking on a poultry farming venture in Nigeria is a promising opportunity, given the industry’s lucrative nature. However, creating a solid business proposal can be as intricate and delicate as nurturing a relationship—it requires care, understanding, and a strategic approach. Here’s how you can craft an impactful business proposal for your poultry farm, and why entrusting this task to FarmBuddy can be your best decision.

Creating Your Business Proposal: A Step-by-Step Guide

• Understand Your Business : Before penning down anything, deeply understand what poultry farming entails. Recognize it as a commercial enterprise with a vast market due to the high demand for poultry products in Nigeria.
• Conduct Thorough Research : Embark on comprehensive feasibility studies to grasp the viability of your business. It involves analyzing the market, understanding customer needs, evaluating competition, and identifying your unique selling propositions.
• Define Your Focus : Poultry farming is broad. Decide whether you’ll focus on broilers, layers, or both, and detail the breeds that thrive in Nigeria’s climate. This specificity helps in tailoring your proposal to meet precise business objectives.
• Outline Your Business Plan Elements : A well-structured business proposal mirrors a detailed business plan. It should include an executive summary, business objectives, operation strategies, market analysis, marketing strategies, financial projections, and risk assessment.
• Emphasize Your Strengths and Opportunities : Highlight the strengths of your business, the opportunities in the Nigerian market, and how your farm intends to leverage these to achieve success and profitability.
• Detail Financial Requirements and Projections : Be clear about the financial aspects. Detail your funding requirements, expected revenue, cost of operations, and profit margins. Transparency in financial dealings can build trust with potential investors or partners.

Why Opt for FarmBuddy?

Choosing FarmBuddy to craft your business proposal brings numerous advantages:

• Expertise in Agribusiness : With a focus on agricultural enterprises, FarmBuddy understands the nuances of the industry, ensuring a proposal that resonates with investors familiar with agribusiness.
• Professional Insight : Their experience equips them with the knowledge to highlight the potential of your poultry business effectively, presenting it as a viable and lucrative investment.
• Tailored Strategies : FarmBuddy can provide tailored marketing and operational strategies that fit the unique aspects of your poultry farm, enhancing the proposal’s impact.
• Comprehensive Research : They undertake exhaustive research to ensure your proposal is backed by current, relevant data, enhancing its credibility and persuasiveness.
• High Success Rate : Their track record of crafting successful business proposals can increase your chances of securing funding or partnerships.
• Time-Saving : Entrusting this task to professionals saves you time, allowing you to focus on other critical aspects of starting and running your farm.

In summary, a well-crafted business proposal is crucial for showcasing the potential of your poultry farm. It serves as a blueprint, detailing your business model, strategies, financial planning, and growth prospects.

Opting for FarmBuddy to prepare your business proposal ensures that you have a professional, persuasive, and data-backed document that can significantly enhance your chances of success in the competitive poultry farming industry in Nigeria .

Frequently Asked Questions on Crafting a Business Proposal for Poultry Farming in Nigeria

1. What key elements should I include in my poultry farming business proposal?

Your business proposal should encompass a comprehensive overview of your business concept, including an executive summary, market analysis, operational strategy, detailed financial projections, and risk assessment. Ensure you highlight the viability, profitability, and growth potential of your poultry farm to captivate potential investors or partners​​​​​​.

2. How can I demonstrate the profitability of my poultry farm in the business proposal?

Focus on presenting detailed financial projections that include your startup costs, operating expenses, revenue projections, and profit margins. Use data from your market analysis to justify your sales forecasts and explain how you plan to achieve these financial goals. Clear, realistic, and well-supported financial information can significantly strengthen your proposal​​​​​​.

3. Why is it important to conduct a feasibility study before writing my business proposal?

A feasibility study helps you understand the market dynamics, assess the economic viability, and foresee the potential challenges and opportunities of your poultry farming venture. It provides essential insights that enable you to make informed decisions and develop a robust business strategy, ensuring that your proposal is realistic, well-planned, and compelling​​.

4. In what ways can FarmBuddy enhance the quality of my business proposal?

FarmBuddy, with its expertise in agribusiness, can provide industry-specific insights, tailor your proposal to highlight the unique aspects of your poultry farm, and ensure that the document is professionally crafted to meet the expectations of investors. Their understanding of market trends and investor preferences can significantly improve the persuasiveness of your proposal​​​​​​.

5. How detailed should the market analysis section be in the business proposal?

Your market analysis should be thorough, detailing the size of the target market, customer demographics, demand for poultry products, competition landscape, and pricing strategy. It should convincingly explain how your poultry farm will meet market needs, differentiate from competitors, and capitalize on market opportunities. The depth of your analysis demonstrates your understanding of the industry and can instill confidence in potential investors or partners

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Profitability of Poultry Farming in Nigeria

January 5, 2024, 7:42 pm.

Are you thinking of going into poultry farming in Nigeria? I’m sure you’ve heard a lot about the profitability of poultry farming in Nigeria and how it is capable of employing millions of people, boost sustainable food production , growing GDP and making you millions of Naira.

Well, as someone who has a first-hand experience of living on and working in a poultry farm, I want to analyze the profitability of poultry farming in Nigeria. If you want to go into the poultry farming business in Nigeria, you need to be aware of the cost and profit potentials.

Poultry Farming in Nigeria

Poultry farming in Nigeria is one of the most advanced animal farming businesses in Nigeria . On closer inspection of national food expenditure in Nigeria, it can be observed that poultry and poultry-related food items has a total expenditure of over N800 billion annually, which amounts to over 2% of total food  expenditure in Nigeria. This huge market and demand for poultry makes it a good agribusiness to invest in.

I’ll be using four parameters to analyze the profitability of poultry farming in Nigeria. These parameters are:

•     Startup capital
•     Operation & Maintenance (O&M)
•     Market
•     Profitability

In order to do a fair and thorough analysis, I’ll be analyzing the profitability of poultry farming in Nigeria from the standpoint of someone who’s about going into poultry farming in Nigeria with 500 birds (layers).

STARTUP CAPITAL

I’ll be making an assumption that there’s an available land already. I won’t be factoring in the cost of getting a land.

Poultry Farming in Nigeria startup costs:

•     500 birds (point-of-lay layers): N1,250,000
•     5 cages (100 birds-per-cage) to house the 500 birds: N650,000
•     Cage house or pen construction: N1,500,000
•     18-months’ worth of feeding (using packaged feeds): N11,880,000

Total startup capital for 500 birds (layers): N15, 280, 000

  OPERATION & MAINTENANCE (O&M)

Poultry farming requires a very high level of O&M because the quality of their production depends on how well you manage them. You have to feed them 2 to 3 times a day and maintain good sanitation . You have to make sure you give them quality water to drink. And from time to time, they’ll be visited by a veterinary doctor who will administer drugs and injections to them in order to keep them healthy. Failure to do this will expose your birds to all manner of diseases and flus . I still remember, like it was yesterday, how the chickens in our farm were dying in their dozens due to the bird flu outbreak of 2006.

Also, you’ll need to hire one farm labour to help you with the O&M. Hire someone who lives close to your farm so that you won’t have to pay him or her too much. The current wages of a farm labour for poultry farming in Nigeria is between N20, 000 to N30, 000 a month.

  MARKET

There’s a very good market for poultry products . Eggs have many health benefits and are always in demand from both individuals and companies. Companies such as bakeries, restaurants, hotels etc. use eggs for making scotch eggs, cakes etc. While individuals love using eggs to eat bread , yam and to bake as well. The good thing about poultry (layers) is that after they’ve spent 18 months laying eggs for you, you can sell them off at a higher price than you bought them. If you can time the sales of your old layers (that’s what they call layers that have reached the end of their laying cycle) to coincide with a festive period like Christmas or Easter, people will fight among themselves just to buy your chickens!

The excretion of poultry can also be bagged as organic manure and sold to vegetable farmers as well. There’s a very good market , all-year-round, for everything that your poultry farm produces. Selling any of your products will never be a problem. Poultry farming in Nigeria is a business with a very strong cash flow

  PROFITABILITY

I’ll exclude the O&M costs from these calculations because the variables can’t be accurately forecasted generally. They are specific to each person’s situation.

Your birds, if well raised and managed, have the capacity to produce 8,670 crates of eggs for you over an 18 month period i.e. 17 crates a day from the 2nd month to the 18th month. You can conveniently sell one crate of egg for N2,,000. So, for 18 months,  eggs alone will generate N17, 340,000 (8, 670 X N2000) for you. At the end of their production cycle, assuming you have a death rate or mortality rate of 5% (this means 5% of your 500 birds, 25 birds, die during their production cycle)  you should have about 475 birds left in your farm after 18 months.

Depending on what time of the year you choose to sell them. You can process the birds and sell them (prices of chicken are highest during festive periods like Christmas and Easter) for N3, 500 per chicken. So your 475 birds can generate N1,662, 500 (475 X N3, 500) for you.

From  egg and bird sales alone over an 18 month period, you will generate a total sale of N19, 002,500. There’s also money to be made from selling their excretion as manure but the cash generated from this is insignificant compared to the  eggs and chicken sales. This is an aspect of poultry farming in Nigeria whose potential isn’t being properly harnessed.

With an invested capital of N15, 280, 000 and total sales of N19, 002,500, your gross profit margin is 24.36%.

Note that most of the things you spent your money on like the cages and poultry pen to house the cages are fixed assets in nature. You will be able to use them for future layer productions and you don’t have to recover their cost in one production. In poultry farming, the tanks and most of the structure you put in place are fixed assets in nature and their costs would be recovered over several productions. As for the feeding, you don't have to provide the money for feeding all at once. You can be generating the feeding expenses monthly from egg sales . Personally, I love the positive cash flow aspect of poultry farming in Nigeria because you get to make sales on a daily and weekly basis.

Going by these four parameters that I’ve used to analyze the profitabilty of poultry farming in Nigeria, poultry farming in Nigeria has an overall rating of B. Poultry farming is a good business to go into and it has unique strong points and weak points.

The trick in poultry farming is to know the techniques and practices that will reduce mortality (or death rate) and boost growth and production. You should also maintain good records of treatment, egg production etc.

The analysis above is not 'cast in stone' or fixed. It's meant to give you a general overview of cost implications. You can decide to do away with some items in order to reduce cost and boost profitablity. For example, you can decide not to use cages and you can opt to manufacutre your own feeds instead of buying already manufactured feeds. If you want to manufacture your own feeds, you should consider maize farming too because maize is a very critical ingredient of poultry feed.

Also, not using cages means your  eggs would be laid on the floor making it susceptible to being broken and becoming very dirty. You should also factor insurance to help cover losses from unexpected disease outbreaks.

Poultry Farming Business Plan and Training

I hope this analysis helps you to make the decision to start your poultry farming business. There are other things you need to put in place before starting a poultry farming business in Nigeria but the ones highlighted above are the basics.

If you need a professional and comprehensive business plan to guide you and help you raise money to start and grow your poultry farming business, you can get one from us.

Our poultry farming business plan and online poultry farming training will show how to start a poultry farm with 2,000 birds and grow it to over 5,000 birds. It will show you all the materials you need to get, how to reduce death rate on your farm (medication and vaccination plan guide), the best way to build your poultry house so that they lay more eggs , what you should feed your birds so as to reduce feeding costs, expected profits, balance sheet and cash flow for 5 year's of operation and so much more! Please see a screenshot of our poultry farming business plan below:

For a payment of N30,000 we will send you our professional poultry farming business plan containing the latest and current prices needed for starting a poultry farming business (layers and broilers) and also give you one month access to our online poultry farming training course. You can see a sample of one of our poultry training video classes below:

Our professional poultry farming business plan also comes with architectural and structural drawings and design for building a modern poultry farming pen that can house 2,000 birds.

With our standard poultry farming business plan you can raise money to start and grow your poultry farming business from banks, investors, donor agencies etc.

To learn more about how to get our poultry farming business plan and online training, please call or chat with us on +2348089864121 or send a mail to [email protected]

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Poultry Farming

POULTRY FARMING Business Plan

1.1 Introduction The laying unit is a section in the poultry enterprise. The major product of this section is the egg. Income comes to the farmer through the sales of eggs, spent birds and manure. Since egg is the focal point of this unit, it is important to understand the importance of the egg which include: i.    Source of protein ii.    Its shell is a good source of calcium iii.    Used in confectionaries iv.    Atheistic value – colouring and designing of egg shells for decoration. For the sake of food security, man is poised to utilize all available food to keep life-cycle. Egg is readily available and cheaper. Thus making it a quick demand for food and egg has a complete balanced diet.

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1.2 Marketing Demand and supply determine the market trend of egg. In Nigeria egg is highly consumed. In most cases, supply does not meet up with demand; therefore egg business is a lucrative one.

1.3 Challenges in Business •    Finance •    Distribution •    Feed/Photo-period •    Diseases •    Health Implication •    Land. Finance Poultry business is capital intensive and production of layers is more expensive than of Broilers.

Breakages These could result from the birds pecking on the eggs, mal-handling or falls from the egg troughs.

Distribution Getting the egg to its final destination is paramount. So whileconsidering the vans to use the road network should not be left out.

Feed/Photo-Period The performances of all poultry depend much on quality feed aside other parameters. In the laying unit, while feed is important the photo-period is also more important than in any other unit in the poultry production. This is because the light helps in egg formation.

Diseases Just like other stock, layers are prone to diseases but vaccines and medications have been improved to deal with them.

Health Implication Health sector says that egg has high cholesterol level which affects man’s heart: thus it is said that children need more eggs than adults. Two eggs a day for children and an egg a day for adults would keep our body functioning well.

Land This is the most challenging factor in Agriculture. High cost of land and fragmentation of land are big challenges, if these are solved, half of the problems of Agriculture is solved.

CHAPTER TWO 2.1. THE LAND It is a free gift of nature but it is scarce. All things being equal, the land for this project is readily available. It is located at Ayepe Town in Ikenna Local Government Area of Ogun State, Nigeria.

2.2 Land Capacity Is Fifteen (25) Acres (About 37.5 Plots of Land) The numbers of birds are thirty-thousand layers and parts of the land should be used for construction purposes and other parts for expansion and integration.

2.3. Reasons For Its Location This land is nearer to major markets in Lagos, Ogun and Oyo States. Its outlays and fertility are good for poultry production.

2.4 Buildings On The Land Buildings are required in the poultry ventures thus the major buildings that this farm would need are: i.    Brooding house ii.    Rearing house iii.    Laying pen/house iv.    Inventory v.    Office vi.    Store vii.    Feed-mill-at 30,000, bird capacity a working feed should be proposed and constructed.

BROODING HOUSE

Brooder refers to any equipment used in taking care of the chicks from 0-6 weeks. It is a complete unit consisting of hovers, drinkers, feeders and a surrounding or guard. Brooders are of various designs. Nature of heat determines the type of brooder. Since this farm should use – electric bulbs, floor brooders should be used. Other brooders are battery cages and tier brooders. This brooding house should be constructed with asbestos sheet and the roofing should be dropping so that while there would be controlled air movement, rain drops would not get in.

Rearing House This unit houses birds of 7 weeks to point of lay. The roof also drops but would be higher than that of the brooding house because they would not need much heat as the brooding chicks and rain drops will not enter it. Feeders and drinkers here are bigger than those of the brooding.

This houses the point of lay till they are spent. The major equipment here is the cage which consists of the drinker/water, feeder and cells.

INVENTORY Implements and other equipment are packed here. It is a store for mechanicals and electrical parts.

OFFICE This is said to be the administration of the farm.

STORE The eggs and bags of feed are preserved in the store pending their shipment/distribution.

FEED-MILL It should have 3 components – Hammer mill, Vertical mixer and Scale/Pelletizer. It would undertake bagging and distributions.

NB: All pens in the farm should be constructed in North-South pattern to check the directions of travels of natural elements such as sun, wind and rain. The farm should be fenced for security and privacy. Ventilation i.e. air flow is an important factor in housing therefore the ideal building is the open sides which would aid cross-ventilation. The design of the houses should bear on mind the climatic condition of location.

CHAPTER THREE METHODOLOGY

3.1.     The brooding house of 199,220. 85ft2 should hold the 30,000 chicks in deep litter. The house should be divided into 12 cells to hold 2,500 chicks each. This is for more effective husbandmanship.

3.2.     The rearing units should be 2 pens of 15,000 birds each. Both houses should have the dimension of 38,441.7ft2

3.3 The laying units should be 5 pens of 6,000 birds per pen in 3 rows and each row should hold 2,000 birds in cages. The dimension should be 3,000ft2 per pen and total of 15,000ft2.

The reason for the larger dimensions in the brooding and rearing pens is because of the feeders, drivers and movement areas for the birds on the deep litter system. The cages come with water and feed troughs. These pens should be on a land dimension of about 883,924.95ft2.

3.4.The Stockings and Section Capacity i.    Brooding House 0.64ft2/chick For 30,000 chicks     =    19220ft2.65 At 4ft2 away from adjacent borders (i)    =    8 x 138.6ft2    =    1108.8ft2 (ii)    =    8 x 142.6ft2    =    1140.8ft2 (iii)    =    8 x 142.6ft2    =    1140.8ft2 Total brooding house and surrounding   =   21,469.6ft2

ii.    Rearing Unit: The total area should be twice the brooding stocked area     =    19220 x 2    =    38,440ft2. This because their body weight and size would have increased. iii.    Laying Pens:Stocking at 0.5ft2/bird each pen of 6,000 birds in capes would occupy 0.5ft2x6,000 birds     =    3,000ft2 At 4ftbetween rows for work/walk ways    =    8ft2 x 54.77ft2 = 8ft2x 55ft2 = 440ft2 At 4ft distance4 from pen foundation     = i    8ft     x     55ft     =    440ft2 ii    8ft    x    63ft    =    504ft2    =    4,384ft2 /pen For 5 pens   =  4,384ft x 5 = 2,1920ft2 At 10ft space between pens and Adjacent borders i    =    60ft x 64ft = 3,840ft ii    =    20ft x 73ft   = 14,600ft2 Sub-total    =    5,300ft2 Total land for laying unit     =    27,220ft2 Therefore, the total land required for 30,000 layers = 21,469.6ft2 + 38,440ft2  +27,220ft2    =    87,129.6 ft2

3.5. Land Required By Outer Structures On The Farm A plot of the land should be ear-marked for the feed-mill (1/2a plot) and the remainder should be used for office and stores at personal desires.

3.5 iiThe water source should be sited at a portion of good water level accessible to the pens. The water must be chlorine free.

3.5. iii The plant/engine room can take a portion of 10ft x 10ft made of bricks (blocks) with allowances for escapes of burnt gases. It should be far from the pen because of noise stress and gaseous pollutions. 3.6. Good Road and Path Layouts should be well maintained.

CHAPTER FOUR SECTION MANAGEMENT The level of farm management is one of the determinants in poultry production. Therefore management practices in the laying enterprise are as follows: 4.1. Brooding: This is where the chicks would be given artificial warmthto grow feathers and other developments. There are some parameters to consider before venturing into poultry production and if well planned out, the business would yield bountifully.

4.2. Litter Maintenance

Since the chicks would be kept under intensive care; litter of wood shavings is desirable. The litter keeps the chicks clean and warm. It is a source of manure at later point in time. So, the litter must always be kept dried – if litter is wet it breeds vectors which introduce diseases to the chicks e.g. coccidiosis.

The litter absorbs moisture from the dropping and this in turn is eliminated by ventilation. Wet litter should be immediately removed. Therefore, a good litter should be highly absorbent, fairly coarse, free from mould and contains minimum amount of dirts.

Proper ventilation lower humidity and keeps litter dry and friable all time. The litter depth should be at minimum 5cm. The covered house is then fumigated and allowed for 2 – 3 weeks. The covering should be removed and allowed for 3-5 days, fill the pen with litter, cover and pre-heat the house for another 2 -3 days. These would kill all disease causing organisms and bring about suitable heat for chicks.

4.3. Where to Buy

Chicks should not be bought from the open market. Known hatcheries with good history should be the place to buy from – such hatcheries include Chi Ltd, Zartech Ltd, Obasanjo Farms Nig. Agrited etc.

4.4 Arrival Of The Chicks

Brooding equipment should be arranged in the prepared house about 12 hours before their arrival. Feed and drinking water should be introduced 2-3 hours before arrival. The house temperature should be about 35OC. The covered house should prevent forced drought and the chicks should have a good ventilation at the same time.

4.5. Brooding: This is the care given to theday old chicks from day old till about 6 weeks of age. The attendant should observe them many times a day from a day old to about 5 days old. Fresh and balanced feed should be served, clean and chlorine free water given. They should be fed with chick’s mash twice a day at average of 2kg/chick for the 1st 8 weeks or about 6g/chick daily.

4.5ii.    The attendant should observe the chicks’ behaviour to know how to regulate the heat. If they cuddle closer to the heat source that means that the heat is not sufficient. If they are further away from each other and heat source that means that the heat is at excess. At adequate heat, they would be evenly distributed. When chicks are feeling hot or cold they would not eat well!

He should see that none is restrained from movement by being trapped between wood or troughs. He should look out for blood vents and separate into a care unit. This bloody vent can lead to cannibalism in that other chicks would peck the vent and could draw out theaffected chicks’ intestines – leading to death. After the 1st week, two times a day routine check is advised-change to bigger feeders and drinkers at week 2.

4.5iii  Adequate Heat in the House

•    It increases immune system •    Builds essential hormones •    Aids several maturity for later egg production. •    Speeds up the growth of feathers.

As they grow the heat is gradually reduced till at 6th week when heat is completely removed according to region/season of the year. The coverings are gradually removed from week 3 through to week 6 when room temperature would have been achieved and the chicks feathered.

4.5 iv.     Medication/Vaccination Schedule in the Brooding House Age     Medication/Vaccination 0 – 3 days    Marek’s vaccination 5 – 7 days    New castle disease vaccine i/o 0 – 7 days    Give antibiotic, vitamins in feed/water 11th – 14 day    1stGumboro diseases vaccine. 21st day    2nd Gumboro disease vaccine 5th week    New castle disease (lasota) After 3 weeks    Give fowl pox vaccination (wing web) 6th week    New castle disease (Komorou)

By BPN Staff

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From Software to Soil: Mfon Uwa's Journey to Revolutionise Poultry Farming in Nigeria with Yiieldy

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

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Poultry farmers in Nigeria face numerous challenges, including inadequate access to quality feed, high disease prevalence, limited veterinary services, poor infrastructure, fluctuating market prices and many others.

Mfon Uwa, the founder and CTO of Yiieldy Technologies Ltd., is helping to provide solutions to some of these challenges via basic scientific measures.

In an exclusive interview with Legit.ng , Uwa discusses how addressing these issues is crucial for improving productivity, ensuring food security, and boosting the local economy.

Uwa, who has a rich background in software development and data engineering, has been deeply passionate about commercial farming since 2016. This passion has led him to establish Yiieldy, a technology company dedicated to agriculture.

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"Yiieldy is committed to integrating AI into all our software products. This dedication ensures that our technological advancements align with the needs and challenges of the agricultural sector, promoting sustainability in a meaningful way."

Reducing production costs with Yiieldy Fiidz

Poultry farming is among the most common agricultural ventures and holds significant potential for generating substantial profit .

Uwa and his team developed the Yiieldy Fiidz app to help poultry farmers in Africa optimise scientific methods to boost production efficiently.

He said the app was developed with a deep understanding of the challenges faced by poultry farmers, particularly in Nigeria.

"I noticed that many farmers in this region need to use basic scientific approaches to farming. How feed is bought and distributed lacks a scientific basis, and most farmers do not keep farm records.

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"So, the Yiieldy Fiidz app aims to help poultry farmers reduce their production costs by at least 40 per cent. In addition to cost reduction, the app features AI Staff, which serves as a knowledgeable poultry farming resource."

He added that the app can perform tasks and provide insights to help bridge the knowledge gap, which is a crucial step towards ensuring the sustainability and profitability of poultry farming in Nigeria.

Farmers can access the app by logging in to the website or downloading it from the Google Play Store.

Admitting that some farmers might have a little challenge utilising the app, Uwa notes that there are training videos on YouTube and the website demonstrating how to use the app.

Additionally, the AI Staff on the app serves as a co-pilot and can guide anyone through all the steps, ensuring they have the support they need.

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Transferring the technology to rural farmers

Speaking on the ability to promote the new app amid many others in Nigeria and transferring the initiative to the rural areas where it is most needed, Uwa says a few strategies have been lined up.

According to Uwa, the Yiieldy Fiidz app's strategy includes partnering with local communities and engaging agricultural extension workers to reach out to farmers.

In addition to partnerships, Yiieldy is organising training sessions and workshops to provide farmers with the necessary knowledge and skills to use the app effectively.

"Furthermore, we will set up demonstration farms where the app is in use, allowing farmers to witness its benefits firsthand. We have also offered a 3-month discount code to all farmers who expressed interest before our launch date, emphasizing the importance of their early engagement and encouraging them to try out the app."

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The role of technology and education

Despite Nigeria's vast and arable land, it's unfortunate that it can still not provide enough food for its populace and create employment opportunities for its youth via agriculture.

The Poultry Association of Nigeria (PAN) has previously raised concerns about the escalating challenges within the sector, which could jeopardise over 25 million direct and indirect jobs in the industry.

Uwa, however, suggests that farmers need to adopt modern agricultural practices and technologies and that more should be invested in agricultural training and education.

"Also, access to finance is crucial. Many small-scale farmers need assistance to access capital to start their agricultural businesses. Providing financial support or facilitating access to loans can help overcome this barrier."

He added that enhancing market access would increase farmers' incomes, making agriculture a more attractive career option for young people.

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Challenges of food insecurity in Nigeria

Nigeria faces challenges related to food security and agricultural productivity. Uwa highlights some of the ways in which the government can intervene to resolve these challenges.

"The primary issues are insecurity and conflict, preventing farmers from returning to their farms. Additionally, addressing low productivity challenges, such as poor market access and post-harvest losses, requires government intervention to provide the necessary infrastructure."

According to Uwa, by leveraging research-based strategies, farmers can ensure sustainable practices, improve livestock welfare, and meet increasing demand, ultimately leading to higher profitability and a more resilient industry.

Four Nigerian agric-tech startups empowering farmers

In related news, Legit.ng reported how four Nigerian agricultural tech startups are empowering hundreds of thousands of smallholder farmers.

In addition to empowering farmers, the startups have also provided avenues for ordinary Nigerians to invest and make money from agriculture.

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They have been able to eliminate the fear of investing in the agricultural sector through the use of technology and reduce the dependence on government intervention funds for farmers.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

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Source: Legit.ng

Victor Enengedi (Business HOD) Victor Enengedi is a trained journalist with over a decade of experience in both print and online media platforms. He holds a degree in History and Diplomatic Studies from Olabisi Onabanjo University, Ogun State. An AFP-certified journalist, he functions as the Head of the Business Desk at Legit. He has also worked as Head of Editorial Operations at Nairametrics. He can be reached via [email protected] and +2348063274521.

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Proposed Rule

Poultry grower payment systems and capital improvement systems.

A Proposed Rule by the Agricultural Marketing Service on 06/10/2024

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Supplementary information:, table of contents, i. executive summary, ii. industry background and need for the rulemaking, a. overview, b. industry background, c. the tournament system, d. need for the rulemaking, iii. broiler grower compensation design (proposed § 201.106), a. degradation of contract pay rates in tournament payments, b. summary of proposed § 201.106, c. questions, iv. operation of broiler grower ranking systems (proposed § 201.110), a. the act prohibits certain aspects of current tournament practices, b. summary of proposed § 201.110, v. broiler grower capital improvement disclosure document (proposed § 201.112), a. problems related to acis in broiler contracts, b. summary of proposed § 201.112, vi. severability (proposed § 201.290), vii. regulatory notices and analyses, a. paperwork reduction act, operation of broiler grower ranking systems under § 201.110(b)(1)(i) through (iii) and (b)(2), communication and cooperation under § 201.110(b)(1)(iv), broiler grower capital improvement disclosure document under § 201.112, costs of proposed §§ 201.110 and 112, b. executive orders 12866, 13563, and 14094, c. regulatory impact analysis, regulatory alternatives considered, benefits of proposed §§ 201.106, 110, and 112, benefits of proposed § 201.106, benefits of proposed § 201.110, benefits of proposed § 201.112, summary of benefits of proposed §§ 201.106, 110, and 112, estimation of costs of the proposed regulations, costs of proposed § 201.106—preferred alternative, costs of proposed § 201.110—preferred alternative, costs of proposed § 201.112—preferred alternative, indirect costs of § 201.112, combined costs of proposed §§ 201.106, 110, and 112—preferred alternative, estimated costs-and expected benefits of proposed §§ 201.106, 110, and 112—preferred alternative, estimated costs and expected benefits of the small business exemption alternative, costs of proposed § 201.106—small business exemption alternative, costs of proposed § 201.110—small business exemption alternative, costs of proposed § 201.112—small business exemption alternative, combined costs of proposed §§ 201.106, 110, and 112—small business exemption alternative, estimated costs and expected-benefits of proposed §§ 201.106, 110, and 112—small business exemption alternative, estimated costs and expected benefits of excluded rule sections alternative, costs of proposed § 201.106 and § 201.112—excluded rule sections alternative, costs of proposed § 201.110—excluded rule sections alternative, combined costs of proposed §§ 201.106, 110, and 112—excluded rule sections alternative, estimated costs and expected-benefits of proposed §§ 201.106, 110, and 112—excluded rule sections alternative, details of the estimated one-time, first-year costs and on-going annual costs of providing disclosure documents required in proposed §§ 201.106, 110, and 112 under the preferred alternative, d. regulatory flexibility analysis, e. executive order 13175 —consultation and coordination with indian tribal governments, f. executive order 12988 —civil justice reform, g. civil rights impact analysis, h. e-government act, i. unfunded mandates reform act, viii. request for comments, list of subjects in 9 cfr part 201, part 201—administering the packers and stockyards act, enhanced content - submit public comment.

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Agricultural Marketing Service, U.S. Department of Agriculture.

Proposed rule.

The U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS or the Agency) is soliciting comments on proposed revisions to its regulations under the Packers and Stockyards Act, 1921 (P&S Act or Act). The proposal would prohibit certain payment practices under poultry grower ranking systems (commonly known as tournaments) in contract poultry production for broiler chickens, require live poultry dealers (LPDs) to adopt policies and procedures for operating a fair ranking system for broiler growers, and require LPDs to provide certain information to broiler growers when the LPD requests or requires the grower to make additional capital investments (ACIs). AMS proposes these changes in response to numerous complaints from growers about the use of tournament systems. AMS intends for the proposed regulations to increase transparency and address deception and unfairness in broiler grower payments, tournament operations, and capital improvement systems.

Comments must be received by August 9, 2024. Comments on the information collection aspects of this proposed rule must be received by August 9, 2024.

Comments must be submitted through the Federal e-rulemaking portal at https://www.regulations.gov and should reference the document number and the date and page number of this issue of the Federal Register . All comments submitted in response to this proposed rule will be included in the record and will be made available to the public. Please be advised that the identity of individuals or entities submitting comments will be made public on the internet at the address provided above. A plain-language summary of this proposed rule is available at https://www.regulations.gov in the docket for this rulemaking.

S. Brett Offutt, Chief Legal Officer/Policy Advisor, Packers and Stockyards Division, USDA AMS Fair Trade Practices Program, 1400 Independence Ave. SW, Washington, DC 20250; Phone: (202) 690-4355; or email: [email protected] .

On June 8, 2022, AMS published an advanced notice of proposed rulemaking (ANPR) in the Federal Register titled, “Poultry Growing Tournament Systems: Fairness and Related Concerns” ( 87 FR 34814 ), to inform policy development and rulemaking under the P&S Act regarding improved fairness in poultry grower ranking systems in contract poultry production. [ 1 ] In the ANPR, AMS solicited comment from the public on how to address potential unfairness arising from the use of poultry grower ranking systems under contracts to grow broiler chickens. As with past opportunities for input, commenters identified a lack of transparency regarding payments under tournament pay systems, fairness in tournament operations, and additional capital improvement requirements as ongoing concerns. These comments and AMS's Packers and Stockyards Division's (PSD) expertise provide the basis for this proposed rulemaking.

Section 407(a) of the P&S Act ( 7 U.S.C. 228(a) ) authorizes the Secretary of Agriculture to make rules and regulations as necessary to carry out the provisions of the Act ( 7 U.S.C. 181 et seq. ). The Secretary has delegated the responsibility for administering the Act to AMS. Under this authority, AMS is issuing this proposed rule to carry out the provisions of section 407 of the Act, as well as sections 202(a) (which prohibits “any unfair, unjustly discriminatory, or deceptive practice or device”), 401 (which requires an LPD to “keep such accounts, records, and memoranda as fully and correctly disclose all transactions involved in his business”), and 410 (which bans the failure to pay “the full amount due [to the] poultry grower on account of such poultry”). The Federal Trade Commission (FTC)'s extensive experience enforcing prohibitions against unfair practices, unfair methods of competition, and deceptive practices arising under the FTC Act has also informed aspects of this proposed rule. [ 2 ]

AMS is proposing to amend 9 CFR part 201, subpart N , by adding new § 201.106 regarding LPD responsibilities for the design of broiler grower compensation arrangements; new § 201.110 regarding the fair operation of broiler grower ranking systems; new § 201.112 regarding disclosure requirements for LPDs when requesting additional capital investments from broiler growers; and new § 201.290 regarding severability. In particular, the Agency is proposing to:

• Prohibit LPDs from discounting or reducing a grower's rate of compensation as disclosed in the broiler growing arrangement based on the grower's grouping, ranking, or comparison to others.
• Establish a duty of fair comparison that requires LPDs to design and operate their broiler grower ranking system to provide a fair comparison among growers, with particular attention to certain factors including the distribution of inputs and flock production practices, the time period of the comparison, the conditions and circumstances for the comparison, and the reasonableness of efforts to resolve disputes.
• Require LPDs to establish and maintain written documentation of their processes for the design and operation of a broiler grower ranking system that is consistent with the duty of fair comparison, review their compliance with these processes not less than once every two years, and retain all relevant written records for five years.
• Require LPDs to provide a grower with a Capital Improvement Disclosure Document when an LPD requests that the grower make an additional capital investment.
• Introduce a severability clause that would permit for certain parts of the Start Printed Page 49003 regulations to remain in effect even if others are deemed unenforceable.

If the proposed rule is adopted, USDA would enforce the regulations through referral to the Department of Justice (DOJ) for appropriate action or, where failure to pay is implicated, through administrative action. Injured individuals would also have a right to proceed in Federal court. AMS would also conduct compliance reviews of adherence to the proposed regulatory requirements and would investigate suspected violations. Additionally, growers can always file a complaint or tip at farmerfairness.gov or by calling 1-833-DIAL-PSD (1-833-342-5773) if they suspect a violation of the Act or any other Federal law or regulation governing fair and competitive marketing, including contract growing, of livestock and poultry.

The current broiler chicken industry is susceptible to both unfairness and deception. To build or upgrade chicken barns, growers both initially and periodically incur substantial debt in loans that typically last 15 years. To meet those obligations and earn a reasonable return, the grower is then dependent on the LPD that provides the chickens (both the number and frequency), the feed, and other inputs. Grower contracts with the LPD are commonly much shorter than the length of the loans. Growers often have little, if any, ability to negotiate their contracts with LPDs or opportunity to switch to alternative LPDs. LPDs' bargaining and market power, premised on lack of competitive alternative LPDs locally, creates significant risk to growers.

Most large LPDs today include a tournament component as part of the compensation arrangement with growers under contract. If a grower's feed conversion performance is above the average, the grower receives a bonus; if the grower is below average, the LPD reduces the grower's compensation. In theory, the tournament system insulates growers from variation in the cost of feed and other inputs, encourages growers to perform to the best of their ability, and rewards better-performing growers. In practice, however, the tournament system has many problems. For example, if an LPD treats individual growers in a tournament differently ( e.g., by providing different quality inputs) the grower's skill would not determine their compensation, which makes for an unfair tournament.

The difference between the length of grower's loan and the length of the grower's contract with an LPD creates another problem. Because LPDs have substantial bargaining power after the initial grower investment, an LPD can require a grower to make ACIs that will increase the grower's debt; if the grower refuses, the LPD can terminate the grower, either actually or constructively (for example, by reducing the number of flocks or chicks delivered). Depending on the facts and circumstances, such actions would be unfair and deceptive practices in violation of section 202(a) of the Act.

Until the late 1950s or 1960s, farmers owned their chickens, and the primary value was in the eggs those chickens laid. After a brief period of chicken auctions in the 1950s, farming chicken meat for distribution led to “grower” contract arrangements with feed distributors and later with processors. As these arrangements gained popularity, processors experimented with various compensation methods to capture costs and incentivize grower performance. One commonly used compensation method was a fixed performance standard payment system. Under a fixed performance standard payment system, individual grower performance is compared to a fixed standard of feed cost or efficiency set by the LPD rather than to an average of other growers in a contemporaneous settlement group. Other methods included square footage contracts, which remain common with pullet farmers ( i.e., farmers who raise chicks from hatching until they are ready to produce eggs, or about 20-22 weeks). Pullet farmers typically are paid weekly or biweekly based on the square footage of chicken housing, or breeder farmers, who are typically paid a flat rate per dozen eggs. [ 3 ] Since the 1990s, the broiler industry overwhelmingly uses the tournament system, described below in section II.C., to compensate growers.

Today, the broiler chicken industry is highly vertically integrated. That is, a single entity owns or controls nearly all the steps of production and distribution, with the only partial exception being the growout stage. The USDA National Agricultural Statistics Service's (NASS) Census of Agriculture (Agricultural Census) reported that 96.2 percent of broilers were raised and delivered under production contracts between LPDs and independent farmers, or broiler growers. [ 4 ] Under a production contract, the LPD provides the inputs, like chicks, feed, and veterinary treatment services, that the contract broiler grower uses in growing the flock and the LPD maintains ownership of the chickens throughout the production process. The grower provides the poultry growing facility, flock management, labor, and utilities required during flock growout. [ 5 ] At the end of growout, the LPD collects and weighs the mature poultry and pays the broiler grower for their services.

To grow broiler chickens on a commercial scale, a grower must make an initial substantial investment in housing. Most farms have multiple houses, and the total investment required can easily exceed $1 million. [ 6 ] The housing, which growers build and equip specifically for the purpose of growing poultry, has an expected life of 20 years or more. The costs of adapting the housing for any other purpose can be prohibitive. [ 7 ] Over time, LPDs have requested or required that growers make ACIs to upgrade housing and equipment for improved efficiency during the contracting relationship. An ACI is defined under 9 CFR 201.2 , in relevant part, as an investment or combination of investments of $12,500 or more per structure paid by a poultry grower or swine production contract grower over the life of the poultry growing arrangement or swine production contract beyond the initial investment for facilities used to grow, raise, and care for poultry or swine. Growers generally finance these long-term assets against much shorter-term production contracts, which generally range from between less than a year (or “flock to flock”) to less than five years. [ 8 ] This can Start Printed Page 49004 expose growers to financial risk and uncertainty around debt repayment and the recoupment of their investments. Growers thus are dependent on LPDs—who control most aspects of a grower's production—to recoup their substantial initial and subsequent investments. [ 9 ]

Currently, many LPDs operate with the benefit of substantial market power in local markets to purchase grower services. Broiler grower operations must be located in close proximity (usually less than 50 miles) to an LPD's feedmills, hatcheries, and processing plants due to the costs of transporting feed to the grower's farm and the costs (including death loss) associated with transporting finished chickens from the grower's farm to the processing plant. This can result in poultry production that is often highly localized and concentrated at a regional level. Most growers have few LPDs in their area with whom they can contract. The table below shows the number of LPDs (referred to as integrators in the table) that broiler growers have in their local areas by percent of total farms (number of growers), total birds produced (number of birds), and total production (pounds of birds produced).

The data in the table shows that roughly 22 percent of growers operate in a pure monopsonistic local market, and that 52 percent of broiler growers (farms), accounting for 55 percent of broilers produced and 56 percent of total production, report having only one or two LPDs in their local areas. This limited competition among LPDs accentuates the contract risks to growers. Even where multiple LPDs are present, there can be significant costs to switching, including adjustments for differences in technical specifications that LPDs may require. To switch LPDs, a grower may need to invest in new equipment and learn to apply different operational techniques for different breeds, target weights, and growout cycles. By requiring ACIs specific to that LPD, an LPD may inhibit the ability of growers to switch to a competing LPD due to the costs associated with those differing housing specifications.

In another study of broiler concentration, MacDonald and Key (2012) found that the level of market concentration in an area tends to correlate with measurable payment impacts on growers. [ 12 ] MacDonald and Key reported that grower payments (per pound, controlling for bird size) were lower in markets with fewer dealers. While the study could not identify the causal impact of LPD numbers on payments, the results conform to general economic theory about the impact that reduced competition would have on prices. For example, going from four LPDs to two LPDs lowered grower payments by four percent, and going from four LPDs to one LPD lowered grower payments by eight percent, controlling for compensation rates and features of the grower operation and contract.

Table 1 however, also shows that more than 23 percent of broiler growers (farms) have four or more integrators in the grower's area, and more than 71 percent report that they can change integrator (although at what cost is not reflected). Although growers in these areas may have relatively more bargaining power than those in more concentrated markets, they remain at significant bargaining disadvantages relative to integrators and commonly subject to industry-wide practices. The potential for the abuse of market power may vary based on concentration and practices employed by specific LPDs in local markets or nationally.

In this proposed rule, AMS uses the term “inputs” to mean resources supplied by LPDs, such as chicks or feed. There is often variation in the quality of these inputs, which can impact the performance of a grower's flock. If an LPD distributes inputs of substantially different quality to growers within a settlement pool, these inputs contribute to differences in relative grower performance, with the growers receiving the lowest quality inputs receiving lower pay as a result. Several commenters in the 2022 ANPR, for example, noted that the quality of inputs can vary, unfairly shifting risk to the growers.

Likewise, LPDs determine production practices on growers' farms, which also affect growers' pay. In this proposed rule, AMS uses the term “production practices” to refer to features of the on-farm production process that are determined by the LPD, such as density of bird placement (number of chicks delivered or placed with a grower per square foot of broiler housing), age at harvest, and weight at harvest. These practices greatly impact grower compensation. If these factors are not applied evenly across grower participants in tournaments, that unevenness also unfairly skews relative performance measures. If an LPD uses a Start Printed Page 49005 settlement pool to compare growers to whom the LPD has assigned substantially different production practices, perhaps, for example, to test the consequences of different feed or veterinary practices, the growers receiving the less advantageous production practices will receive relatively lower pay. These production decisions may result in variation in the amount of feed required per pound of meat that is unrelated to grower effort or acumen. Including both types of growers for comparison in a single settlement pool is analogous to matching wrestlers across different weight classes.

As described above, the organization and structure of broiler production is characterized by a high degree of vertical integration, market power in many regional markets, substantial investment in production capital that is specific to a single LPD, nearly universal use of production contracts, and use of complex grower compensation systems based on relative performance. Asymmetric information, incomplete contracts, and hold-up are also issues of concern in poultry contracting that motivate the specific interventions proposed in this proposed rule.

Information asymmetry in poultry contracting arrangements can contribute to market inefficiencies and unfair and deceptive practices. Asymmetric information occurs when one party to a contract has more critical information than the other party. LPDs have information related to (as well as control over) many areas of strategic decision making that impact growers. For example, LPDs use systems of grower compensation and methods for calculating grower payment designed to limit total grower compensation, while maximizing production efficiency. LPDs also have exclusive information about many factors under their control that influence the performance elements of poultry production and thereby affect grower payments. Even where some of information is disclosed to growers, LPDs continue to have much more information about the quality and distribution of grower inputs, specific production practices the LPD assigns to individual growers, the likely effect on grower performance of different input qualities and production practices, and the manner in which the LPD chooses to compare growers in a ranking system. [ 13 ] In addition, LPDs determine the types of ACIs they request or require of growers, which growers may not anticipate and can place significant drains on available cash and substantially degrade expected investment returns. Neither growers, nor AMS, have ready access to the information that informs these specific requests unless LPDs provide it to them. Information asymmetry can lead to market failure in the broiler production industry because growers must make important production decisions without access to important information. This also facilitates abusive practices where the information would help growers, and AMS, identify and halt those practices sooner.

Contracts used in broiler production are also often incomplete. Under the typical poultry production contract, LPDs compensate the grower for raising live poultry from the time of chick delivery through retrieval by the LPD for slaughter. Such a contract may be viewed as complete, with no material gaps, if the contract terms include the substantive legal, practical, and economic promises, obligations, and contingencies needed to operate in a poultry growing arrangement. These terms should be verifiable and legally enforceable. Incomplete contracts arise when terms key to basic functioning of the contract do not meet these conditions and magnify risks with respect to the performance of the other contractual party, leading to other potential inefficiencies. In this instance, incomplete contracts may give LPDs discretionary latitude to deviate from expectations.

LPDs often offer highly complex pay systems in broiler contracts based on the interplay of several separate components, including base pay rate, incentive pay for ACIs or certain production practices, and performance adjustments under the tournament. The complexity of such pay systems makes it difficult for growers to fully understand the potential range of payments they are likely to receive or the ways in which LPD performance or nonperformance may affect that pay, preventing them from properly evaluating the fairness of the contract before signing. For example, several ANPR commenters noted the difficulty growers face without having full understanding of—or confidence in—how inputs are distributed or how the quality may affect performance. Their inability to evaluate how this distribution occurs inhibits their ability to effectively contract and to effectively enforce those contracts to the extent that is possible given the overall power imbalance and concentration in many local markets.

Contracts that require investments in contract-specific assets can give rise to the hold-up problem. The economic concept of a hold-up problem refers to a situation in which one or both parties to a transaction must make investments in such contract specific assets, and the two parties may be unable to cooperate efficiently due to incomplete or asymmetric information and the inability to write, enforce, or commit to contracts. Once a party becomes locked into a transaction as a result of making a transaction-specific investment, they lose bargaining leverage and become vulnerable to exploitation by the other party. This may involve one party to a contract opportunistically deviating from expectations of the other party or failing to live up to previously agreed upon terms. Hold-up occurs in broiler production due to market failures associated with incomplete grower information, contract-specific investments, and market power, as well as insufficient enforcement around aspects necessary to maintain market integrity and prevent market abuses including unfair breaches of contract. Broiler growers lack sufficient information about the nature of inputs they will receive from the LPD over time, the performance of other growers in the tournament pool, and the nature of complex tournament operations under grower contracts.

The production of broilers requires investment in specialized equipment and facilities, which can be specific to the enterprise of broiler production and have little alternative value outside of a contractual relationship with a limited pool of nearby LPDs (or, in some cases, a single LPD). [ 14 ] As a result, the realistic options for growers to reallocate their labor and invested capital are reduced, and growers are committed to growing chickens to pay off the financing of the initial capital investment, plus ACIs. When growers are committed to broiler production to pay off lenders and have few, if any, alternative LPDs with whom they can contract, they are under more pressure to accept less favorable contract terms. LPDs can behave opportunistically by failing to perform under contracts in ways that growers reasonably expect and by requiring ACIs with little or no economic value to the producer. Economic research has shown that hold-up can lead to reduced Start Printed Page 49006 compensation when a grower has only one LPD available with which to contract in the local area. [ 15 ]

LPDs typically pay broiler growers for the services they provide using a unique system in which growers' pay is based in part on a comparison of their feed conversion relative to other growers. A 2014 survey found that over 93 percent of these broiler production contracts make use of a relative performance payment system, often called a tournament system. [ 16 ] Under a tournament system, the contract between the broiler grower and the LPD provides for payment to the grower based on a grouping, ranking, or comparison of broiler growers delivering broilers to the same company during a specified period (usually one week). This grouping is informally referred to as a settlement group.

Under a typical tournament system, the broiler grower receives a fixed payment per pound of broilers produced, called a base pay rate, plus a calculation adjustment based on how efficiently the grower used the resources provided by the LPD to produce each pound of broilers (informally referred to as a performance adjustment). [ 17 ] LPDs typically calculate the performance adjustment primarily by comparing the feed conversion ratio ( i.e., the quantity of feed consumed by the flock divided by the weight of the flock delivered) to the average ratio of all growers in the tournament settlement group. (As a technical matter, grower contracts sometimes use fixed weights expressed in dollar terms for this calculation.) Broiler growers whose costs are less than the average cost for that tournament settlement group receive a bonus above the base pay rate, while those whose costs are above the average incur a discount from the base pay rate. Broiler contracts also typically specify a minimum rate of pay that the grower can receive after all performance discounts have been applied. The broiler grower may receive additional incentives as components of total payment from the LPD to employ particular housing, equipment, management practices, fuel usage, or other contributions the LPD requests. Some of these incentive payments may be based on the delivered weight of each flock and others may be a fixed per flock amount.

In a simplified example of how tournament systems operate, the LPD places flocks with 10 growers under contract to deliver the same-sized broiler chickens to the dealer's processing plant at the end of a specified growout period. Upon harvest, the LPD determines each grower's performance by measuring the quantity of feed and other inputs in the LPD's tournament formula (such as chicks supplied by the LPD or medicines) per pound of broilers produced by the grower. The LPD then compares individual grower ratios against average ratios for all growers in the settlement group and ranks individual growers according to their relative performance within the group of 10 growers. Each grower's pay is determined by adding a bonus to, or subtracting a discount from, the contract's stipulated base pay rate, calculated as the difference between the grower's ratio and the average ratio within the tournament grouping for that specific growout period. This is also known as a performance adjustment. For instance, if the grower's contract stated a base pay rate of $0.0550 per pound, an above-average grower ( i.e., a more efficient grower with a lower cost per pound produced) in this hypothetical example could receive $0.0615 after the performance adjustment, while a below-average grower could receive $0.0530.

LPDs benefit from the tournament system in several ways. The tournament system provides LPDs control and certainty over total compensation to the growers as a group. For each tournament, the LPD knows the total compensation that will be paid per pound of broilers produced by the group; that total amount is allocated among the growers through performance adjustments (amounts above, or deductions from, the base pay rate). LPDs also benefit from the tournament system to the extent it may incentivize additional grower effort and expenditure of resources beyond that required for the grower to remain in the LPD's rotation of growers.

The tournament system is intended to, and LPDs in fact purport that it does, reward growers financially for their experience, skill, effort, and investments in up-to-date and efficient housing and equipment. [ 18 ] Additionally, assuming that all growers in a tournament grouping are treated similarly and the variables within the tournament grouping are within the control of the growers, the tournament may insulate growers to some degree against external shocks that affect all growers in the grouping. [ 19 ] Examples of external shocks might include unfavorable weather, the introduction of new genetics, or changes in the LPD feed formulation. This protection can be incomplete, however, because these external shocks—some of which are within the control of the LPD—can adversely affect the overall weight of the broilers in a tournament affected by such shocks, thereby reducing the base weight compensation for all participating growers.

The tournament system can operate unfairly and deceptively. Without a guaranteed base pay rate, the complexity of the tournament makes it difficult for growers to clearly understand what the minimum amount is they could actually receive in payment. Base pay can be, but is not commonly, a guaranteed minimum pay. [ 20 ] (This is discussed in greater detail below in section III.A.) Furthermore, if the comparison-compensation factor ( i.e., the bonus or deduction) is a large percentage of total compensation, that variance in total grower compensation could turn a reliable business proposition into a high-risk venture without a demonstrable countervailing benefit. Therefore, sufficiently large variance in total grower compensation can, by itself, be deceptive and unfair. Moreover, because many broiler growers operate in regions with just one to two LPDs, the local market dynamics may force Start Printed Page 49007 growers to enter into riskier contracts, in particular, contracts that do not guarantee them an adequate minimum base pay rate, flock placements and stocking densities, or length of contract in relation to the loan obligations commonly necessary to engage in broiler growing.

Compensation based on relative performance when LPDs control the distribution of inputs and assignment of production practices creates the potential for unfairness and deception. Nor are tournament pay systems an effective incentive system when factors outside of the grower's control largely determine performance. Unfortunately, growers have no choice but to rely on the good faith of LPDs for the fair administration of tournaments. They must trust that LPDs will use their extensive information and control to prevent or remedy situations where a particular grower within the tournament receives dissimilar inputs or the assignment of production practices that result in a substantial disadvantage to that grower within the settlement pool. They also must trust that LPDs will not use their control to advantage favored growers or to punish or otherwise impermissibly disadvantage growers.

The tournament system also introduces considerable complexity and uncertainty for growers in the calculation of the compensation for their services and in evaluating the returns on growers' investments, which can sometimes make it more difficult for growers to discover unscrupulous conduct by LPDs, to compare offers from competing LPDs, and to plan and manage their businesses.

USDA has received concerns about the impact of unfair or non-transparent LPD practices from growers in listening sessions and during comment periods for more than a decade. In 2010, USDA held a series of workshops in conjunction with DOJ to hear from farmers about concentration and trade practice issues in agriculture. Normal, Alabama, hosted one such session with an emphasis on the poultry industry. [ 21 ] Many growers complained that their success or failure depended on factors controlled by LPDs and that LPDs required them to undertake additional capital investments. Further, growers expressed concern about the lack of choice among LPDs in many relevant regional markets, which further enhanced LPD's bargaining position and control over growers.

Grower public comments at the 2010 workshop led USDA to propose rules in 2010 and 2016. [ 22 ] Growers have continued to communicate to USDA specific areas of concern regarding the poultry industry. Since 2021, AMS renewed its efforts to address these concerns through different approaches, one of these being the June 8, 2022, ANPR which informed this proposed rule.

In the ANPR, AMS sought comments and information to inform policy development and future rulemaking regarding the use of poultry grower ranking systems. The comment period for the original notice was June 8, 2022, to September 6, 2022. AMS provided additional time for the public to submit comments and extended the comment period to September 26, 2022. AMS received a total 168 comments, 153 during the first comment period and 15 during the second. Organizational commenters included farm bureaus, live poultry dealers, poultry industry trade associations, meat industry trade associations, and other associations or non-profit organization. Commenters expressed both support and concern about the use of tournaments in poultry production.

Many commenters supported the current poultry grower contracting system and opposed rulemaking. Commenters supporting the current poultry grower contracting system stated they believe it is well designed; efficient; and beneficial to growers, dealers, and consumers. Commenters were concerned that changes to or the elimination of the tournament system could have an adverse financial impact on LPDs. Commenters stated that they believe that the current system encourages efficient poultry production by providing greater payments to the most efficient poultry growers. Supporters contended the tournament system has fueled improvements and innovations, incentivized growers to raise birds ethically, and allowed for efficient risk management. They also stated that the Agency has failed to establish credible evidence of the existence of exploitation; that the proposed measures would address exploitation, if it existed; or, that the Agency has the statutory authority to engage in this exercise.

Other commenters opposed the current tournament payment system, stating that tournament systems do not meet their intended purpose and that the payment systems exemplify the manipulative and unjust abuses or practices that the Act was designed to prevent. They cited arbitrary, unjust, or punitive distribution of inputs and production variables, all of which are controlled by integrators; potential manipulation of the group composition for similar purposes; and penalties for even small deviations below average. Some commenters noted that LPDs often supply insufficient information with respect to requested or required upgrades and deceptively induce growers to make costly ACIs. Commenters also asserted that LPDs demand costly upgrades that are arbitrary and apparently untethered to any reasonable assurance of increased compensation. Some asserted that the tournament system operates instead as a cost-shifting mechanism that controls growers like employees while keeping them from collaborating in furtherance of their best interest. Commenters stated that proposed rulemaking would help address bargaining power imbalances for growers, provided proper enforcement. Commenters also requested that AMS establish a guaranteed base payment floor that would ensure the producer does not suffer a loss of income and can earn enough to exceed incurred debts. Trade organizations commented on how input variability affects pay and that LPDs are known to take action to reduce unpredictability in grower outcomes. Monitoring and intervention to remedy unfairness requires an LPD to expend effort and incur cost, and the LPD does not directly benefit from the increased fairness to growers. Therefore, the LPD has an incentive to shirk this responsibility.

Commenters echoed many of the same concerns that were voiced in the 2010 workshops and that animated previous unfinished rulemaking efforts. A survey conducted by the Rural Advanced Foundation International USA (RAFI) in preparation for its comments to the ANPR was particularly striking. The survey covered 105 growers from 17 States, with 90% active growers and 10% retired growers. At the broadest level, 94% of its growers expressed significant dissatisfaction with the design and operation of the tournament system, indicating that, “1. Tournament systems are generally unfair and pit growers against each other (75%). 2. Tournament systems are too often used to retaliate or discriminate against Start Printed Page 49008 growers (70%). 3. Tournament systems often negatively impact grower income (68%).”

Surveyed growers reported an astoundingly high percentage of problems, including: flock health problems (92%); suboptimal layer flock (92%); 6-hour feed disruption (90%); suboptimal flock pickup time (88%); 12-hour feed disruption (83%); incorrect feed mix (75%); extended layout times (73%); reduced stocking density (72%); arbitrarily disadvantageous tournament group placement (63%); low revenue generating breed (59%); feed delivery discrepancy (59%); reduced annual flock placement (54%); non-randomized flock gender (40%); retaliation via any of the above (25%); and more. [ 23 ] That comment also included multiple direct quotations from growers describing these types of experiences. The challenges that RAFI's growers report in their comments highlight the range of concerns with current practices in the broiler grower industry that remain unaddressed. “They don't have to cut you off, they can just bleed you dry,” said one grower in the RAFI letter, which encapsulates the challenge with both the arbitrariness and the control inherent in the design and operation of tournaments that benefits LPDs at the expense of growers. Commenters, including RAFI, highlighted expensive additional capital upgrades that unexpectedly burden growers, as well as inhibit the ability to switch integrators. Growers also reported informal “no poach” agreements and conscious parallelism among LPDs. According to the most recent large USDA survey on the topic, growers with the choice of only one integrator are paid six percent less than those with four or more integrators. [ 24 ]

Some of the largest LPDs have begun adopting contracts that ameliorate certain aspects of these persistent complaints. For example, some LPDs offer contracts where the base pay rate is the minimum pay and there are no negative performance adjustments. In response to an enforcement matter, one of the largest LPDs has also already limited the magnitude of comparison-based pay, in part to address related concerns. [ 25 ] This proposed rule takes note of and builds on that progress to align important farmer protections across the industry.

Current tournament contracts are unfair and deceptive when they mislead growers about expected revenue and the potential range of payment outcomes on a settlement-by-settlement basis—particularly when they are unclear about growers' practical ability to control the range of the payment outcomes. Both the lack of grower control over payment outcomes and the variability of the outcomes can be unfair. The complexity and opacity of current tournament contracts impair growers' ability to compare contract offers between LPDs. This section describes this problem in depth, discusses AMS's proposed regulation, and provides questions for commenters to consider, including around an additional proposal to limit excessive variability in pay.

As explained in section II, “Industry Background and Need for the Rulemaking,” tournament contracts contain one or more pay rates that LPDs use as a basis to allocate compensation among growers in a flock settlement group. These pay rates are generally expressed in cents per pound. In most tournament contracts, positive relative performance (bonuses) will add to these rates while poor relative performance (discounts) will deduct from these rates, to reflect the grower's performance within a settlement group. Applying these adjustments, whether positive or negative, significantly affects growers' effective rates of compensation and net income.

In a 1999 survey conducted by Schrader and Wilson, 43 percent of growers reported earning income below their expectations. [ 26 ] In response to the ANPR for this proposed rule, some commenters contended that any ranking system is fundamentally unfair if it lacks a firm base pay rate. Some commenters stated that premiums should be determined by objective and transparent criteria, and a few suggested a capped or limited premium such as 25% of base pay or a percentage based on performance. An agricultural advocacy organization further acknowledged that a system in which performance-based incentives include only additive bonuses and not negative discounts could still be effective in fostering competition among growers. Another commenter noted that LPDs entice growers by representing that they can expect to earn the average pay provided to all growers, obscuring the fact that every settlement has winners and losers regardless of an individual grower's absolute performance. The Chair of the FTC, in response to the 2022 ANPR, commented that “poultry companies often function as local monopsonists or oligopsonists with the power to control prices, prescribe contract terms, and retaliate against growers who object to these tactics,” and that disclosure was valuable but insufficient to address the problem. A consumer advocacy group said tournament systems that dock pay based on relative performance can lead to capricious pay differences that do not accurately reflect differences in performance, such as cases where a grower who ranks last in a tournament at 10 percent below the average feed-to-weight conversion receives a 50 percent pay cut. Many of these and other commenters further recommended that AMS should set a price floor for grower pay rates to ensure growers can, among other things, earn reasonable profits and cover costs.

An organization representing LPDs countered that most poultry contracts already have a minimum “base” payment floor that performance-based adjustments to growers' “standard” or “average” pay cannot go below, and that AMS should not regulate this issue. Start Printed Page 49009 According to the commenter, if LPDs wanted to avoid passing on costs to consumers, they would be forced to lower their new base pay rate to keep the overall pool of money allocated to grower pay at a similar level, which means they would calculate all performance-based compensation bonuses based on this lower rate rather than on a rate equivalent to the current average pay. This commenter asserted this outcome would lead to an income redistribution from high-performing growers to low-performing growers, encouraging less efficient, and therefore costlier and less profitable, poultry production.

In carefully considering this issue, AMS analyzed a sampling of current contracts from a cross-section of ten LPDs, including at least one contract from each of the top five broiler companies identified in the WATT 2021 rankings  [ 27 ] to evaluate their contract terminology and the significance of the gap between “base” and “minimum” pay rates. Seven out of ten, including the top five companies ranked, use the term “base” with reference to a pay rate that the LPD adjusts by tournament ranking. Two use the term “average”, and one uses the term “middle.” The differences between the “base” or “average” rate and the “minimum” rate were as high as 42 percent and as low as 13 percent, with an average of approximately 27 percent with “minimum” pay always lower than “base” pay. This serves as a rough proxy for the range of variation that may exist under different contracts, and thus demonstrates that the stated base pay rate is not representative of actual, ultimate pay to growers. In general, there is no limit (maximum) on bonus payments in most contracts. No contract in our sample used the term “base” to identify the actual minimum payment possible. This analysis also demonstrates that the disparity between “base” and “minimum” rates is often significant.

After considering public comments and the results of its contract and settlement analyses, AMS has determined that the practice of discounting or reducing contract pay rates creates significant risk of deception or unfairness for growers. This practice conceals the true payment baseline, which makes it difficult for growers to compare broiler production contracts from LPDs competing for their services. This can reduce competition among LPDs for grower services and result in market inefficiencies. It can also inhibit growers' ability to plan and manage their businesses. A grower evaluating the expected value of these contracts can estimate potential earnings by reviewing a contract's stated “base” or “average” pay rates; however, growers are not able to precisely evaluate the “downside risk” (used here to refer to the financial risk associated with performing in the bottom half of the settlement pool). It is very difficult for a grower to estimate how much their pay rate might be discounted ( i.e., reduced below the stated base pay rate) based on their relative performance in the settlement pool. This is especially problematic because the design of the tournament system means that roughly half of growers will rank below average. Significant factors that affect tournament rankings—such as settlement groupings, inputs, and flock ages, the timing of collection for delivery, and weights—are outside growers' control.

Moreover, empirical research has shown that franchisees (whose relationships with franchisors in some respects look similar to the relationships growers have with LPDs) are overly optimistic in their expectations of their performance under the franchise agreement. In their review of the empirical literature, Benoliel and Buchan report that “although franchisees are often perceived as sophisticated business people, they systematically suffer from a common psychological bias: over-optimism about the future.”  [ 28 ] Benoliel and Buchan's findings are consistent with previously cited comments from grower organizations suggesting that growers underestimate the possibility of below average outcomes, reflecting the same type of optimism bias reported for franchisees.

Under section 202 of the P&S Act, the practice of discounting disclosed “base” pay rates in broiler contracts is an unfair and deceptive practice. The use by LPDs of contracts that fail to clearly state an accurate rate of compensation obscures substantial and unavoidable downside risk. Under this system, growers must estimate future earnings using contractually stated “base” pay rates, rates that, by the design of the system, LPDs know will not be realized by roughly half of the settlement group. Additionally, this lack of clarity in contracting terms impedes growers' ability to meaningfully compare competing offers from other LPDs in markets where growers are fortunate enough to have more than one or two LPDs to contract with. AMS's analysis of unfair and deceptive trade practices in poultry contracts is informed by prior P&S Act case law and States' unfair practice laws. Additionally, the FTC's extensive experience enforcing prohibitions against unfair practices and unfair methods of competition arising under the FTC Act has, in part, informed this proposal. [ 29 ]

In conclusion, deductions from the contractually stated base pay rate create variance in pay that harms growers and their ability to accurately assess the risk they are taking, which is particularly problematic given the risk they bear. Further, these growers cannot reasonably avoid this harm if they wish to become or continue to be growers. Finally, AMS has not found any evidence that poultry tournament systems that include deductions from the base pay rate provide a benefit to growers or competition in the market for grower services that outweighs the harm to growers. Deductions in other livestock contracts commonly reflect performance within the control of the producer. This deceptive poultry discounting practice creates an unfair competitive advantage for LPDs who use it relative to LPDs who do not discount the base pay rate. The widespread adoption of these types of contracts has frustrated fair competition, instead of enhancing it. Such discounting also is a reflection of the market power of the LPDs.

AMS is proposing to add a new § 201.106 titled, “Broiler grower compensation design.” This proposed provision would prohibit the reduction, or discounting, of any compensation rate under the broiler growing arrangement on account of a comparison to other growers. That is, when a broiler growing arrangement between an LPD and the grower provides for the grower's compensation (which is commonly determined by a weight-based rate), the broiler growing arrangement would Start Printed Page 49010 clearly state that rate and not provide for further mechanisms or calculations that would reduce that rate based on the grower's performance relative to other growers. The broiler growing arrangement could provide for the rate to be increased based on the broiler grower's performance relative to others, but in no event could the rate be decreased or discounted by that comparison. As used in this proposed rule, “rate of compensation” refers to any payment amount that the LPD utilizes to compensate the grower under a broiler growing arrangement, which could include “base pay,” “minimum pay,” or any other rate defined in the contract. That rate would have to be prominently and clearly defined as the guaranteed level of pay a grower will receive if they perform to the minimum specifications of the relevant provisions of the contract. To the extent that a broiler growing arrangement had more than one rate of compensation, none of the rates could be reduced or discounted by a comparison. Under existing AMS regulations, a broiler growing arrangement must include all payment terms in the contract ( 9 CFR 201.100(c)(2) .

Prohibiting the discounting or reduction of rates of compensation would provide growers greater clarity regarding the minimum payments they could earn under compensation rates stated in the broiler growing arrangement, thus better enabling them to properly evaluate their base pay rate under the arrangement prior to entering the contract. The proposed rule's prohibition against discounting or reducing the rate of compensation disclosed in the contract would provide growers with an assured minimum payment when they satisfy their responsibilities under the agreement. Increased clarity regarding the rate of compensation may also enable new growers to better determine how they will perform under the tournament system before they undertake costly investments. Experienced growers may benefit as well, especially in advance of any potential capital investments.

This proposed rule would prohibit LPDs from misleading growers with the presentation of a compensation design whereby the grower receives an income lower than expected under a rate of compensation in the broiler growing arrangement. As noted above, minimum pay is a payment term that would be required be disclosed under the terms of broiler growing arrangement. ( 9 CFR 201.100(c)(2) .) This proposed rule would also protect growers against the risk of unavoidable discounts. While a grower may miss out on additional income, the LPD would not be permitted to discount the grower's pay below the expected rate of compensation that was disclosed to the grower and relied upon by the grower when making the decision to participate in the broiler growing arrangement. AMS emphasizes that it may also be a deceptive practice were an LPD to make representations during the contracting process that implied most growers will get bonuses or are otherwise likely to earn more than the minimum where such representations were false, misleading, or contained material omissions or were otherwise not in compliance with other relevant rules and regulations under the Act. ( 9 CFR 201.102 .)

AMS expects that LPDs will still be able to pay a grower to elicit a competitive level of performance using a design that conforms to the requirements of this proposed rule. The LPD could reward performance for feed efficiency relative to the growers in the settlement with a minimum base pay rate per pound and an upward adjustment to the payment formula. A compensation structure without a penalty or reduction from a true guaranteed minimum pay rate, however, may still be unfair and/or deceptive if facts and circumstances demonstrate an unlawful exercise of market power or other legally unjustified means. For example, if the variable income (from the range of bonuses) is large relative to the grower's potential total compensation, the grower may still be unable to reasonably estimate actual payments. The variability of payments alone may create unjustifiable risk for the grower. As a result, the compensation system could still be unfair and/or deceptive. We are seeking comment, as noted below, on the best way to assess such unfairness and/or deception.

Based on AMS experience (including investigations and reviews of contracts), many LPDs already separately identify bonuses to incentivize capital investments as additions to a base pay rate. Under most current LPD grower contracts, growers receive these additions to the base pay rate before the performance adjustment. Under the proposed rule, LPDs would be prohibited from making any adjustments to discount or reduce the rate of compensation disclosed in the contract. LPDs can adhere to this requirement without changing the total expenditure per pound of broilers or performance incentive structure used in most contracts, despite the new base pay rate being the true guaranteed minimum pay rate. Clearly rewarding performance above the base would give growers clarity regarding which elements of their pay are based solely on the weight of the delivered flock and which elements reflect their performance relative to other growers. Virtually all growout contracts currently have a minimum pay, but it is often not clear how that minimum relates to performance pay. As noted earlier, some of the largest LPDs have already adopted contracts at some complexes where the base pay rate is the minimum pay and there are no negative performance adjustments.

AMS emphasizes that the proposed rule would not absolve the LPDs of liability under section 202 of the Act arising in other ways from any particular tournament system or tournament systems overall, including from any rate, distribution, or variability of compensation. Excessive variability in total pay can make it difficult for growers to estimate likely earnings and can unfairly transfer costs or risk from the LPDs to growers. Such a system also means a substantial number of growers may not be able earn a reasonable return. For example, if an LPD set the base pay rate at $0.01, AMS would almost certainly find that this violates section 202. If the base pay rate does not reasonably guarantee that the grower can make loan payments, which are known to the LPD, the compensation system is likely unfair. Likewise, if the base pay rate is suppressed below competitive levels (due to an unlawful exercise of market power or other legally unjustifiable means) and does not provide a reasonable return considering the operating costs and the costs of investments over the long term, the compensation system may still be unfair.

Neither this proposed § 201.106, nor proposed §§ 201.110 or 201.112, purport to alleviate all potential unfair aspects of the tournament system or of the integrated model of broiler production. At this time, AMS proposes enforcement on a case-by-case basis to remedy other particular aspects of tournament system unfairness, including issues arising from excessive variability in payments. For example, the Department of Justice, upon referral by USDA, entered into a settlement with LPDs for P&S Act violations. [ 30 ] That settlement barred processors from discounting base pay rate compensation and capped total relative (comparison-based) compensation at 25 percent of the total of base pay rate plus Start Printed Page 49011 performance compensation. AMS believes that this approach alleviates extreme variability as an aspect of existing tournament system unfairness and believes that compensation variability beyond 25 percent is presumptively unfair, whether as a function of the tournament system or as a result of other payment practices utilized by LPDs in the integrated model of broiler production. [ 31 ]

In support of that goal, AMS believes that the clarity and simplicity provided by the proposed rule's prohibition on deductions will assist AMS and growers in identifying the presence of such concerns, and thus will assist AMS in any further review regarding unfairness overall. As noted, we are also seeking comment on whether other options would work more effectively. In particular, AMS asks below (in section III.C.) whether it should be more prescriptive in the proposed rule, including whether it should adopt requirements to document or disclose processes related to the proportion of relative pay to the base pay rate, whether this proportion should be limited in all circumstances, and whether and how to establish a methodology for evaluating unfairness where the minimum base pay rate for growers was not reasonably likely to deliver a fair return. It also seeks feedback on whether these requirements should apply to payment systems that are not a tournament but may be otherwise unfair or deceptive due to asymmetrical power and other dynamics in the integrated model of broiler production. We also seek comment on the economic outcomes from these possibilities, including whether they would change the performance incentive structure, in particular whether it would raise total grower compensation by increasing total expenditure or whether it would adjust performance payments within the existing total expenditure.

Under proposed § 201.106, LPDs may not reduce any rate of compensation under a broiler growing arrangement based upon the grower's grouping, ranking, or comparison to other growers in the grower ranking system. Further, because optimism bias may dilute the effect of disclosure—and because disclosure is not always a sufficient remedy for an unfair act or device—this proposed rule is intended to complement existing regimes aimed at improving transparency and fairness in the poultry industry. [ 32 ] Improved clarity in the presentation of payment systems would enhance the effectiveness of disclosure requirements and is intended to bring to light unfairness in other aspects of payment systems.

AMS expects that LPDs would comply with this proposed rule by desisting from discounting any rate of pay under the broiler growing arrangement and instead utilizing a minimum rate of pay with comparison-based performance bonuses paid in addition to the new minimum base pay rate. AMS is attentive to the risk that LPDs would lower the base pay rate beyond what the grower expects to be the minimum based on the broiler growing arrangement or LPD promises and grower expectations. Those concerns may be particularly acute where the bonus is large relative to the base compensation. AMS is also attentive to concerns that growers may not have entered into their current contracts had a clear base pay rate been disclosed.

Accordingly, AMS also asks questions below regarding whether to establish limitations on the lowering of the base pay rate, such as by establishing a backstop or criteria based on existing obligations under the present contract with the grower; by using a relationship between pay per pound (pool payments) at the complex and the minimum pay; by setting a hard limitation on the proportion of comparison-based pay to total pay (such as 25 percent of the sum of base plus comparison-based performance pay  [ 33 ] ); or by requiring a base pay rate that makes a reasonable return likely if the grower delivers under the contract. In addition, AMS inquires on the advisability of AMS reviewing contracts for compliance with the transition limitations, as well as for how long those limitations should be in place.

Enforcement of § 201.106 could occur in several ways. Growers would contact AMS to submit a complaint regarding an alleged violation of § 201.106. AMS would investigate, which could lead to referral to DOJ for appropriate action or, where failure to pay is implicated, USDA enforcement through administrative action. [ 34 ] AMS also would review LPD contracts, along with other required records from the LPD (including with respect to actual payments made), in connection with routine compliance reviews and investigations. Injured individuals would also have a right to proceed directly in Federal court.

AMS specifically invites comments on various aspects of the proposal as described above. Please fully explain all views and alternative solutions or suggestions, supplying examples and data or other information to support those views where possible. Parties who wish to comment anonymously may do so by entering “N/A” in the fields that would identify the commenter. While comments on any aspect of the proposed rule are welcome, AMS specifically solicits comments on the following:

1. Does proposed § 201.106 effectively and appropriately address concerns that growers have expressed in increasing transparency, understandability, fairness, or certainty as to compensation under a comparison system or otherwise benefit growers in reducing deception and/or unfairness? How might this rulemaking more effectively and appropriately ensure that what growers can reasonably expect regarding their compensation (based on disclosures in the contract or otherwise) matches what growers actually receive? If the proposal will be effective, why? If not effective, in what ways can it better do so?

2. AMS has indicated that if the base pay rate is suppressed below the competitive levels, such as due to the LPD's unlawful exercise of market power or other legally unjustified means, and does not provide a reasonable return considering the operating costs and the costs of investments over the long term, the compensation system may be unfair. Should AMS adopt a rule that more prescriptively requires that the base pay rate must be expected to provide a reasonable opportunity for a grower that delivers under the contract to earn a reasonable return if they comply generally with the specified production practices? If so, please describe the rationale and methodology to be applied (including whether and how it should account for local market power dynamics); and, if not, would another approach be more effective?

3. Is it presumptively unfair for comparison-based compensation to equal or exceed 25 percent of total (base pay rate plus comparison-based) compensation for any grower? If so, is the 25 percent threshold the appropriate portion to presume unfairness, and is it most effective if calculated at the complex level or at the individual grower level? Start Printed Page 49012

4. Is case-by-case enforcement on the fairness of the total comparison-based bonus effective? Should AMS include a paragraph (b) to proposed § 201.106 stating that, “Although unfairness will be determined on a case by case basis, the LPD shall be deemed presumptively in violation of this paragraph (b) if: on an annual basis at any complex [for any grower] of the LPD, the amount of Performance Payments exceeds 25% of the sum of Performance Payments and Base Payments, where `Performance Payments' are the compensation paid to broiler grower that is subject to adjustment based upon the relative performance in a grouping, ranking, or other comparison of broiler growers; and `Base Payments' are all compensation that is guaranteed to be paid to broiler growers.”?

5. Please comment on the expected response to the inclusion of the provision described in question 4. In particular, how likely is the provision to be a binding constraint at either the grower or complex level? When the constraint is binding, would LPDs be likely to raise base pay and/or limit performance payments—thus reducing the difference between top and bottom performing growers—without increasing total grower compensation expenditures? Would LPDs also change the types of growers they contract with, for example in terms of size or performance?

6. If AMS were to include the provision described in question 4, would LPDs be likely to provide non-comparison-based incentives (such as per pound or per square foot compensation for housing known to provide efficiencies to the LPD), or deploy other incentives (such as fixed performance bonuses)? Would total grower compensation expenditures by LPDs be expected to increase under these other incentives? How would this vary with or depend upon grower characteristics ( e.g., size, individual management ability, or investment) or market conditions?

7. How would the inclusion of the provision described in question 4 affect the relationship between tournament compensation systems and additional capital investments? Would it help to ensure that growers receive adequate compensation for ACIs?

8. What additional requirements would help ensure compliance with this proposed rule such that grower comparison-based unfair and deceptive reductions or discounts to compensation are eliminated, while continuing to permit payment designed to incentivize performance? Please provide as much detail as possible regarding the relationship between payment and performance, any injuries to growers and whether they can be avoided, the effects on other growers and competition, and what data sources AMS should examine to evaluate these concerns more effectively.

9. Should AMS require LPDs to document or disclose the process they use to establish the proportion of total grower pay that is determined by comparing a grower's performance to other growers' performance? Should regulations require documentation of comparisons designed to prevent unfair or unreasonable levels of relative performance-based pay? Should regulations require companies to report how the proportion of comparison-based performance pay to total pay incentivizes effort, grower investment, and other outcomes? If AMS creates these documentation responsibilities, should this be done based on an individual grower or complex-wide basis?

10. What specific burdens might LPDs face in complying with this proposed rule? Would this require LPDs to substantially modify their business model? If so, what specific modifications would be required and why?

11. What risks might growers and/or LPDs face during any transition to the proposed § 201.106? How might AMS mitigate transition risks? How might AMS more fully account for unfairness and deception that may have occurred in the course of contracting for the current broiler growing arrangement? Should AMS establish a backstop for this regulation or set out criteria based on existing obligations under the present contract with the grower ( e.g., requiring that the current base pay rate be the new minimum rate, or requiring current payments overall remain comparable), on a relationship between compensation per pound (pool payments) at the complex and the minimum pay, or on the proportion of comparison-based compensation for a grower (such as a limit to 25 percent of total compensation). If so, how long should any transition limitations extend?

12. To minimize transition risks to growers, should AMS include a requirement that LPDs submit to AMS for review any contracts modified or revised to comply with new § 201.106? Should compensation data be required to be submitted for review? Should AMS review of modified or revised contracts during any transition assess the changes made to ensure LPDs have not reduced total aggregated and individual grower payments in such a way that is inconsistent with payment expectations under the original contracts?

13. Should AMS make the effective date for the provisions of this proposed rule 180 days following publication of the final rule in the Federal Register ? If you recommend shorter or longer for some or all of the provisions, please explain why.

Under the tournament system, LPDs control the inputs and production practices assigned to growers. Therefore, LPDs unfairly affect grower payments when they compare growers without taking action to manage and mitigate unequal inputs or unfavorable production practices over one or more tournament settlements. This section describes this issue in depth, discusses AMS's proposed regulation, and provides questions for commenters to consider.

As described above in section II, “Industry Background and Need for the Rulemaking,” LPDs control the inputs and production practices growers use to compete under the tournament system. LPDs generally promise that tournaments provide growers with the same inputs, production practices, and contract-related services. [ 35 ] Yet LPDs do not have sufficient incentive to ensure the design or operation of a fair ranking system for growers. LPDs commonly do not adequately specify in their contracts their obligations regarding the operation of the tournament. LPDs benefit from information asymmetries relative to their growers. LPDs also commonly do not adequately perform under their contracts with growers, failing to meet growers' reasonable expectations relating to contractual performance or behaving in a punitive or inequitable manner to growers.

The harms of an unfair tournament system fall disproportionately on growers. The benefits of increasing fairness in the tournament to the LPD may not justify the costs in providing greater fairness. Many growers and grower representatives responding to the ANPR for this proposed rule expressed concern regarding the extent to which variability in inputs can affect Start Printed Page 49013 grower performance and thus pay. Commenters stressed the problematic nature of LPD control over inputs and the resulting potential for poor-quality inputs to affect broiler grower compensation. These commenters said LPDs' discretion over the distribution of inputs and flock production practices gives them control over almost all factors affecting a grower's final performance, such as health, breed, and gender composition of flocks; age of breeder flocks; number of birds placed; amount, quality, and timing of food; medical care provided; and flock pick-up. Although some industry trade associations commented in response to the ANPR that the tournament system worked effectively to manage these risks, other industry commenters noted that without adequate safeguards to manage and mitigate input and production practice differences, the tournament system is coercive, predatory, and deceptive because it denies growers the ability to earn based on their skills, efforts, and investments.

Several of these commenters emphasized that LPDs are unlikely to acknowledge variability in their distribution of these inputs to growers or engage in timely communication and cooperation to address what growers believe is the inappropriate provision of input or production practices. Commenters also asserted that LPDs sometimes intentionally deliver inappropriate inputs and assign inappropriate production practices to growers ( e.g., by providing high percentages of sick chicks, delivering feed designed for older birds to new birds, or delaying pickup) to penalize growers or force contract termination. According to commenters, even unintentional input variability can lead to unfair comparisons within a tournament group. These commenters indicated poultry growers who receive lower quality inputs (including inputs inappropriate for the type or age of the bird) are likely to rank lower compared to those who receive better inputs, and consequently, receive lower pay than the rate disclosed in the growing contract. Some commenters asserted that issues with the availability and quality (including appropriateness) of feed are especially common. In response to the ANPR, a North Carolina non-profit organization conducted an anonymous contract grower survey in 2022. [ 36 ] Ninety-six percent of poultry growers surveyed reported a negative impact on their income due to feed disruption, receipt of incorrect feed mixes for a flock's growth stage, or receipt of less feed than stated on their feed load receipt.

Studies demonstrate that differences in production practices and inputs, such as stocking density, slaughter weight, bird gender, and breeder flock age, can impact the performance metrics used in determining the performance adjustments in tournament payment systems. [ 37 ] Some breeds, for example, may exhibit faster growth rates, which may result in heavier farm weights and better feed conversion rates than other breeds. [ 38 ] A major genetics company, Cobb-Vantress, reports substantially different feed conversion rates and finishing weights for three of the most commonly used commercial broiler breeds. AMS investigations and analyses have likewise found situations where growers' performance increased with some inputs compared to others and that growers performed better when assigned certain production practices rather than others. [ 39 ]

In response to the ANPR, LPDs and trade associations representing them noted the challenges in trying to determine standards to regulate distribution of inputs and production practices among growers. A meat industry trade association indicated that LPDs are known to take action to reduce unpredictability in grower outcomes, such as contracts that evaluate performance over multiple flocks and contract pay adjustments for factors outside growers' control. For example, some LPDs adjust payments for different densities of birds placed or provide credits for excess seven-day death loss. AMS investigations have also found that some LPDs will attempt to ensure that broiler growers do not receive chicks from young laying hens too often because this can negatively affect growers' tournament performance. Some LPDs will communicate and correct ordinary problems on a timely basis, which helps growers avoid unintentionally punitive outcomes than would otherwise be the case. Yet these claimed practices are not universal and depend extensively on the goodwill of the LPD, commonly via the manager of the local complex. This dynamic leaves considerable room for local complexes to make discretionary decisions that may harm growers. While LPDs regularly maintain extensive grower manuals, there is currently no requirement that manuals address the range of situations that can undermine a fair comparison or monitor whether the local complexes comply with that manual in practice.

LPDs would incur the costs associated with ensuring the fair operation of their tournaments, while the benefits of a fairly operated tournament would accrue primarily to broiler growers. However, LPDs' substantial bargaining power, growers' risk, and growers' inability to reasonably avoid the tournament system (or other payment systems that effect similar dynamics arising from unfair distribution of inputs and assignment of production practices) require that LPDs provide a basic level of fairness for growers.

AMS acknowledges that some variability in input quality is unavoidable: not all chicks or inputs controlled by the LPD could ever be identical. Moreover, the ability of an LPD to adapt regarding input decisions and production practices is necessary to respond to external conditions. While these changes can dramatically, and sometimes disastrously, affect overall compensation for growers, these changes may not significantly affect the distribution of the relative performance component of compensation among rival growers. That is, if LPDs provide all growers in a tournament group similar-quality inputs and compare growers using similar flock production practices, or if they take steps to balance these differences over time or otherwise adjust pay to account for the relevant differences, these components under LPD control may not unfairly affect growers. In situations where LPDs rank Start Printed Page 49014 growers against growers who have received higher-quality inputs-or who operated under more favorable production practices-without taking effective steps to make appropriate adjustments, the tournament operation itself is unfair because the growers who received lower-quality inputs or less favorable production practices will likely receive lower pay compared to the rest of the tournament group through no fault of their own. The ranking in the tournament will not reflect the grower's actual performance.

Because different inputs and flock production practices affect performance under the tournament, and therefore a component of grower payments, an LPD has committed an unfair and deceptive practice under the Act when it operates a tournament that uses arbitrary or inequitable delivery of inputs and production practices—that is, without establishing systems to manage and mitigate material differences in inputs and production practices among growers in a comparison group. This duty of a fair comparison also arises out of the Act's prohibitions on unjust discrimination, the manipulation of prices, and failure to pay. Violations of the Act include an LPD failing to maintain policies and procedures necessary to document the company's compliance with those fair comparison duties, owing to the Act's recordkeeping authorities ( 7 U.S.C. 221 ).

Current tournament practices are persistent and prevalent across the industry, giving rise to industry-wide harm because even small pay differences cause significant harms in the aggregate. As supported by the response to the ANPR, growers have complained to AMS over the years of arbitrary, inequitable, and sometimes punitive delivery of adverse inputs or unfavorable production practices in successive tournaments. Growers cannot avoid the impact of adverse inputs and unfavorable production practices on their performance. For example, LPDs determine the type, quality, and number of chicks delivered to a grower per square foot of housing, handle the delivery of feed, and determine the age at which they collect the chickens.

As discussed in section II, the tournament system can sometimes reduce harm to growers from external shocks (such as adverse weather conditions) and may enhance competition among growers in ways that, at least in theory, can improve grower productivity. Yet arbitrary or inequitable differences in inputs and production practices are not an essential feature of delivering those benefits; in fact, they undermine them. Arbitrary or otherwise inequitable differences run contrary to the theoretical design of the tournament system and the description of the tournament system that the industry itself provides.

In theory, LPDs would provide the optimal mix of inputs to all growers to yield an overall better final product and in turn yield a larger profit. However, differences in inputs will exist, and LPDs want to obtain full value out of all usable inputs—even if those inputs perform differently. LPDs also have limited financial incentive to engage in the effort to evenly distribute inputs and production practices across growers in a settlement pool. Indeed, growers have commonly asserted that the “noisy” grower who complains more to local agents is commonly believed to more readily be tendered “bad” or otherwise inappropriate, untimely, etc., inputs or flock production practices. The question is thus how to manage those differences to ensure a fair comparison between growers. For example, breeders have a lifecycle of 50 weeks. They produce optimal chicks between weeks 20-34, but they also produce chicks that have value outside the optimal window. The LPD has a financial incentive to grow all these chicks to maturity, and therefore will distribute higher- and lower-quality chicks in any one settlement period. Growers who receive a higher proportion of suboptimal chicks are disadvantaged in a relative comparison to growers who received a higher proportion of optimal chicks. The LPD's general incentive is to use all the chicks, regardless of how they are distributed among growers.

Because the tournament system functions to allocate a component of grower pay, LPD practices that impair the fairness of the comparison result in a misallocation of performance compensation, thereby unfairly reducing the compensation that may otherwise be due to some growers in violation of section 410 of the Act. Section 410 requires full payment if LPDs fail to compensate or supplement the compensation of affected growers though alternative means. Further, AMS's analysis of unfair and deceptive trade practices in the operation of these comparisons has been informed by prior P&S Act case law, States' unfair practice laws, as well as the FTC approach to unfair practices and unfair methods of competition.

For this part of the proposed rule, AMS seeks to build on the series of poultry practices regulations that it has adopted over the years, including 9 CFR 201.100 (which requires various settlement and other disclosures), 9 CFR 201.215 through 218 (which provide various protections against unfair and deceptive practices relating to the suspension of delivery of birds, additional capital investments, reasonable time to remedy a breach of contract, and arbitration), and other provisions, as well as enforcement actions in response to grower complaints about the tournament system and its operation. This proposed rule would require that broiler grower ranking systems contain adequate safeguards necessary to ensure that they function fairly and as described to growers in their contracts.

When an LPD describes the tournament system under the broiler growing arrangement as delivering certain outcomes for growers, yet the LPD does not implement sufficient processes to ensure a fair comparison in the tournament system, the LPD is exploiting the asymmetric information gap, as well as the gap in bargaining power and hold up, between the LPD and growers. From the perspective of a reasonable grower, this is misleading and harmful. It also gives rise to harms that growers cannot avoid. Such harm includes the loss of earnings. In some cases, it includes targeted coercion, retribution, or manipulation of prices from the strategic deployment of inappropriate inputs or flock production practices, as well as LPD failure to communicate or address concerns. These unfair and deceptive practices are impermissible under the Act.

In addition, under those circumstances, LPDs compete in a market in which the incentive is to avoid their obligations and at times deploy tournament operational differences to obtain coercive or punitive ends. Pervasive deception in contractual relationships, breach of contract, or the use of coercion or retribution in markets are not beneficial to competition. The grower may not have entered into the contract knowing that the tournament would be deceptively or unfairly manipulated to the grower's disadvantage, and the grower has an expectation that the LPD will make a good faith effort to distribute inputs and production practices evenly. Boilerplate disclosure that seeks to limit an LPD's commitment to good faith implementation of tournament practices does not cure the deception either, because the LPD maintains full control over the inputs and flock production practices, which are at the very heart of the LPD's offer to growers under a contract. Disclosure is not a remedy for unfair practices by LPDs.

LPDs' existing recordkeeping regarding the design and ongoing Start Printed Page 49015 operation of their tournaments is insufficient for AMS to monitor the ongoing transactions between LPDs and growers as it relates to allocation of payment for grower services. LPDs do not currently maintain clearly written processes describing how and when the LPD distributes inputs and deploys flock production practices, makes adjustments to comparisons or deploys non-comparison compensation methods, and responds to complaints. Existing LPD records have tended to lack sufficient documentation that would allow for systematic examination of the reasoning for changes in the inputs, flock production practices, or communication practices assigned to particular growers, either as designed or during operation of the tournament. Therefore, even when LPDs provide the details of those input or flock production practices to AMS investigators, the insufficiency of the documentation impedes AMS's ability to reconstruct an LPD's reasoning for its decisions. LPD communications and complaint monitoring documentation has also been lacking. Further, AMS has encountered challenges within LPD organizations regarding corporate management's ability to record and monitor practices occurring at local complexes. AMS's enforcement of the Act is hampered when corporate management lacks documented processes and records to explain why coercive and retributive practices appear to have been deployed at local complexes despite corporate management's assurance that coercion and retribution are not a factor in the assignment of inputs and flock production practices; enforcement is also hampered when LPD corporate management lacks documented processes and records to explain an LPD's purported failure to address complaints.

AMS is proposing to add a new § 201.110, “Operation of broiler grower ranking systems,” to regulate LPDs' operation of ranking systems ( i.e., tournaments) for broiler growers. Paragraph (a) establishes an LPD duty of fair comparison in tournaments. This duty of fair comparison would require LPDs to structure their tournament system in a manner that will provide a fair comparison among growers. AMS acknowledges that there may be instances in which a fair comparison is not possible. AMS recognizes unforeseen differences in inputs or other circumstances occasionally prevent fair comparison in a tournament. In those instances, an LPD must compensate growers through a non-comparison method specified in the contract that reflects a reasonable compensation to the grower for its services.

Thus, under § 201.110(a) the Secretary would evaluate specific factors to determine if a poultry grower ranking system ( i.e., tournament) is reasonably designed to deliver a fair comparison among growers. Paragraph (a)(1) would require that LPDs providing compensation to broiler growers based upon a grouping, ranking, or comparison of growers delivering poultry design and operate their poultry grower ranking system in a manner that would provide a fair comparison among growers. Paragraph (a)(2) would establish the factors the Secretary will consider in determining whether an LPD reasonably designed its poultry grower ranking system to deliver a fair comparison among growers or whether the LPD must utilize a non-comparison compensation method. Paragraph (a)(3) would require that when an LPD uses a poultry grower ranking system and cannot conduct a fair comparison for one or more growers, the LPD must compensate those growers through a non-comparison method specified in the contract that reflects reasonable compensation to the grower for its services. The non-comparison method is intended to fairly compensate the grower and therefore, absent special circumstances where a rationale and an agreement to do otherwise are reasonable and appropriate (and documented as such), would need to be equal to or more than what the comparison-based compensation rate would have delivered. The provisions of paragraph (a) are described in more detail below.

Paragraph (b) would establish documentation requirements regarding the processes (policies and procedures) the LPD maintains for the design and operation of poultry grower ranking systems for broiler growers. AMS is proposing this provision to ensure that the LPD would maintain a full and complete record of every aspect of the tournament system structure. This recordkeeping system would provide AMS with the information needed to determine whether the tournament is, in fact, following principles of fairness laid out in proposed paragraph (a). Paragraph (b)(1) would require that LPDs establish and maintain written documentation of their processes for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison; paragraph (b)(1) also delineates the items the written documentation must include. Paragraph (b)(2) would require that LPDs review their compliance with those processes not less than once every two years and delineates the requirements of that review. Paragraph (b)(3) would require that LPDs retain all written records relevant to their compliance with paragraph (b) for no less than five years from the date of record creation. These provisions, their anticipated effect, and compliance requirements are discussed in more detail below.

Section 201.110(a)(1) would require LPDs to design and operate their poultry grower ranking system to provide a fair comparison among growers. The proposed rule would focus on how LPDs address inputs and flock production practices, as well as flexibility and communications practices controlled by the LPD that impact grower payment. LPDs have a multitude of means to maintain fair comparisons, including correcting inputs or production practices inappropriately delivered, extending the time period over which the comparison is made, adjusting payment for certain inputs or production practice differences, removing growers from tournaments where a fair comparison is not possible, etc. LPDs are in violation of the Act when they do not design and deploy, based on the particular circumstances of their businesses, those tools to deliver a fair comparison.

Section 201.110(a)(2) describes the factors that AMS would consider when determining whether an LPD reasonably designed or operated its poultry grower ranking system to deliver a fair comparison among growers or whether the LPD must utilize a non-comparison compensation method. The factors are listed in subparagraphs (i) through (vi).

Paragraphs (a)(2)(i) and (ii) address whether an LPD's distribution of inputs and assignment of flock production practices would cause material differences in performance that growers cannot avoid, and whether the LPD will make appropriate adjustments to compensation. Fair comparison of growers requires that growers do not receive a distribution of inputs or assignment of production practices that cause material differences in performance from other growers to whom they are being compared and are caused by factors outside of a grower's control. Material differences in performance are differences that meaningfully (from the perspective of the grower) impact grower payments.

To comply with these requirements, LPDs would need to identify inputs and flock production practices under their control that impact grower payment. Start Printed Page 49016 LPDs would also be required to improve systems to monitor and, as appropriate, adjust the allocation of inputs and flock production practices to reduce the unequal distribution among growers settled together. LPDs would be required to adjust grower pay to compensate growers if a fair comparison is impractical due to unavoidable inequitable allocations. For example, the LPD may determine that a grower payment adjustment, such as a five-flock average, may be appropriate when the LPD provided chicks that are later discovered to be diseased, and no fair comparison is possible. Such a grower payment adjustment would need to employ a non-comparison method specified in the contract that reflects reasonable compensation to the grower for its services. Ensuring that the payment adjustments agreed to are fair will be part of regular AMS poultry compliance reviews.

Paragraph (a)(2)(iii) would address whether the designated time period used in the LPD's comparison is appropriate, including whether the LPD uses one or more groupings, rankings, or comparisons of growers to mitigate the effects of any differences in inputs over the designated time period. Fair comparison of growers does not necessarily require that LPDs provide all growers precisely equal inputs and identical production practices for each flock. This proposed rule would permit LPDs to minimize production inefficiencies that would arise from a literal equality standard while avoiding an unfair comparison of grower performance by ensuring that LPDs compare growers fairly over a flexible but reasonable period of time. AMS considers a period of one year or less to be a reasonable timeframe across which to compare growers' performance because it provides sufficient time to limit variation from one event while ensuring that LPDs treat growers fairly over a reasonable timeline. The one-year period coincides with commonly used five-flock averages and with one-year comparisons used in some live poultry growing arrangements.

Paragraph (a)(2)(iv) would address whether conditions and circumstances outside the control of the LPD render comparison impractical or inappropriate. A settlement group may have differences among LPD-provided inputs, LPD-assigned production practices, or other factors beyond the control of LPDs and growers that render a reliable comparison impossible. The Secretary will consider the facts and circumstances applicable to each case. One example might be the previously described situation where an LPD unknowingly delivered chicks to a grower that are later discovered to be diseased so that no fair comparison is possible. Pursuant to paragraph (a)(3) of this section, under these circumstances the LPD is required to compensate growers using an alternative to the tournament system through a non-comparison method specified in the contract. One approach is to pay the grower for pounds delivered at a rate that is the sum of the grower's base pay rate and the average per pound performance compensation rate for the tournament from which the grower was excluded, or for the last several tournaments in which the grower participated. An average of the grower's own per-pound total compensation rate over the previous 12 months—commonly, a 5-flock average, variable depending on the size of the birds—might be a useful non-comparison alternative if the prior tournaments were not also affected by unfair conditions and circumstances that would reduce their utility as reference points. AMS may review documentation maintained by the LPD to ensure that such conditions and circumstances were not present.

Paragraph (a)(2)(v) would address whether an LPD has made reasonable efforts to resolve concerns in a timely manner that a grower may raise regarding the LPD's exercise of discretion over the implementation of its fair comparison processes. In determining compliance with this requirement, through audit or in response to a complaint, AMS would consider whether an LPD has demonstrated responsiveness and commitment to resolving legitimate concerns in an appropriate manner that would avoid potential secondary harm to the grower. “Reasonable efforts” and “timely” resolution of a grower's concerns will depend on the facts and circumstances of each case, with particular attention placed on whether the situation adversely impacts the fairness of the comparison(s) for the grower. For example, if a grower raises immediate and urgent concerns about feed quality, such as the delivery of feed meant for older chicks than the grower has, the LPD's resolution of this concern should be as immediate as possible to limit any additional undue damage to the grower's flock due to lack of adequate nutrition. If a grower raises concerns about feed persistently being delivered late or in an insufficient quantity, the Agency would examine the LPD's “reasonable efforts” taken to adjust the method of delivery. Additionally, an LPD would be prohibited from retaliating against a grower in any manner for raising concerns as to whether a fair comparison method was used.

Lastly, paragraph (a)(2)(vi) would state that the Secretary would consider any other factor relevant to a fair comparison. This provision would give AMS the authority to address any other facts or circumstances that adversely affected the fairness of the design or operation of the poultry grower ranking system. AMS would determine compliance with this requirement by examining the facts and circumstances, and in particular, whether the LPD took specific actions to undermine the comparison process. For example, were the LPD to intentionally group together certain growers for a comparison as a means of manipulating or adversely affecting their comparison-based outcomes, this prong would enable AMS to consider those facts and circumstances.

AMS underscores that it would, when determining whether an LPD has designed and operated their broiler grower ranking system to provide a fair comparison among growers, consider the fair comparison factors set forth in § 201.110(a)(2) against the backdrop of the magnitude and design of the relative performance pay. Where relative performance compensation forms a very small portion of grower compensation net of long-term debt and other fixed costs, AMS would expect that differences in inputs and flock production practices would cause fewer material differences in pay. AMS would expect this to operate on a sliding scale. AMS would also consider the design of the formula to determine its impact on the magnitude or distribution of compensation, if any.

In some situations, differences among LPD-provided inputs, LPD-assigned flock production practices, or factors beyond the control of both LPDs and growers can make a reliable comparison impossible. In such cases, the proposed rule under § 201.110(a)(3) would require that an LPD must fairly compensate growers through a non-comparison method. The non-comparison method must be specified in the contract and would have to reflect a reasonable effort to fairly compensate the grower. For example, if an LPD is unable to pick up a flock in a timely manner because of processing disruptions (as occurred during the COVID-19 pandemic), the LPD may remove the grower from the settlement rather than compare that grower's flock performance against growers delivering flocks of a significantly different age. In such cases, the LPD must compensate the grower Start Printed Page 49017 using a reasonable non-comparison alternative. Multiple approaches could be considered reasonable depending on the particular circumstances. For example, AMS is aware that LPDs often pay the grower an amount equal to the average rate they received over their previous five flocks.

Compliance with § 201.110(a) would require that LPDs establish a standard for fairness in the operation of tournament compensation systems. The proposed regulation creates a framework for holding an LPD to account under the Act for using an unfair comparison between growers because of the LPD's unequal distribution of inputs and assignment of flock production practices. The proposed rule would require LPDs to assess input allocations and flock production practices to meet the standard of fairness delineated in § 201.110(a)(2). LPDs could meet the standard through a range of approaches deployed over time, allowing the LPD to take into account the natural variability in living systems while protecting growers from substantial injuries they cannot avoid owing to the distribution of those inputs. For example, typically, flocks are settled with chickens ready for slaughter in a particular week. Sometimes, if there are not enough similar birds ( e.g., similar weight) ready in one week, LPDs may use all birds slaughtered over two or three weeks. Alternatively, some contracts settle a grower's last five flocks (approximately one year) against all other growers' last five flocks to help choose a comparable settlement pool. AMS considers a period of up to one year to be reasonable because that provides sufficient time to limit variation from one event, while assuring that LPDs treat growers fairly over a reasonable timeline. Relying on the documentation of written processes set out in proposed § 201.110(b), AMS would evaluate compliance based on the extent to which the LPD carefully evaluated the factors and took reasonable measures to protect growers from substantial injuries that they could not avoid.

Inputs like breed of chick, feed, and medication can vary independently of production practices like density, target weight and slaughter age, and vice versa. The proposed rule would provide LPDs flexibility in managing these elements within the framework of their duty to provide a fair comparison, as documented by the written processes required under proposed § 201.110(b). Based on their evaluation of these elements as set forth in their written processes, LPDs would use allocation and grouping strategies that promote a fair comparison among tournament participants, provide remedial action to offset unavoidable circumstances in which fair comparison is not possible, and resolve grower concerns. With respect to both the distribution of inputs and the assignment of flock production practices, an LPD's duty is to design and operate a tournament to enable a fair comparison between growers. While AMS acknowledges the possibility of variability in inputs and production practices, the LPD should not design and operate their contract with the grower in manner that would impose on the grower injuries that the grower cannot reasonably avoid which the LPD could reasonably prevent.

Section 201.110(b) would set forth documentation requirements regarding LPDs' duty to ensure the fair design and operation of broiler grower ranking systems. Under section 401 of the Act, AMS is authorized to prescribe “the manner and form in which such accounts, records, and memoranda shall be kept” whenever the Secretary finds that the records of an LPD do not fully and correctly disclose the LPD's business transactions ( 7 U.S.C. 221 ). Paragraph (b)(1) would require that LPDs establish and maintain written documentation of their processes for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison. This proposed rule would require documentation to include written processes, informally called policies and procedures, regarding the process for (i) inputs under LPD control, (ii) flock production practices under LPD control, (iii) comparison flexibility, and (iv) communication and cooperation with growers. The written processes would provide a general description of the items that the proposed rule requires be set forth, yet must contain sufficient detail to provide a reasonable user of the processes—such as the local manager that directs the operation of a tournament at a complex—with an understanding of the processes, including any policies that the LPD adopts governing the relevant parts of its operation and any discretion it or its agents may exercise under those policies, as well as the procedures it or its agents may deploy.

Under paragraph (b)(1)(i), LPDs would be required to create written processes for selecting and distributing inputs to growers, including how and when the LPD delivers inputs, how and when the LPD manages similarities and differences of quality and quantity in the delivery of inputs, how and when the LPD identifies differences in inputs and the potential effects of those differences on grower performance, how and when the LPD adjusts the inputs the grower receives, and any steps the LPD takes to adjust compensation calculations based on inputs growers receive. LPDs unfairly harm growers when they distribute inputs in a manner that disadvantages a grower relative to other growers in a tournament. Growers cannot control inputs such as quality of chicks or high- or low-quality feed, yet receipt of low-quality inputs has an unfair impact on their performance in a tournament. LPD processes would require ongoing accounting and monitoring of inputs supplied to each producer using objective measures of quality that are generally accepted in the industry. Processes developed by LPDs would be required to address key areas of concern, including management of chicks that differ in quality and performance and variation in quality or quantity of feed or medication provided to growers, as well as conscious selection and delivery of inputs to specific growers for specific purpose to facilitate fair comparisons. To the extent possible, LPDs should include policies and procedures for balancing disparity of inputs either within a single flock or over multiple flocks as appropriate and feasible.

Under paragraph (b)(1)(ii), LPDs would be required to create written processes for production of live poultry, including how and when the LPD assigns density at delivery; how and when the LPD manages pickup of birds with respect to slaughter weight and bird age, including documenting any variation by pounds and number of growout days; how and when the LPD adjusts how a grower is compared to other growers with different assigned flock production practices or otherwise adjusts the flock production practices the grower receives; any steps the LPD takes to adjust compensation calculations based on the flock production practices the grower receives; and how and when the LPD minimizes, adjusts, or otherwise accounts for differences in production practices. LPDs can unfairly manipulate grower payments when they compare growers within a single tournament settlement group for which LPDs have required different types of production practices. Under the proposed rule, LPDs must develop policies and procedures that describe the processes for ongoing accounting and monitoring of LPD-determined flock production practices allocated to each producer. The LPD's processes must provide a consistent approach to minimize differences in production practice assignments and describe methods to Start Printed Page 49018 compensate growers for differences that result in harms, for example, if differences do not equitably balance out over time as set forth in the LPD's written processes.

Under paragraph (b)(1)(iii), LPDs would be required to create written processes for the LPD's grower comparison flexibility methods. If an LPD evaluates growers over one or more groupings or rankings (rather than within each grouping or ranking), these policies and procedures would need to describe how the LPD sets a reasonable time period over which the LPD fulfills its duty of fair comparison. Additionally, if the LPD might remove a grower from a ranking group, the LPD would be required to describe the circumstances under which the LPD would remove a grower and how the LPD would compensate the grower to satisfy the non-comparison compensation method required under proposed § 201.110(a)(3). For example, LPDs may not have enough comparable growers with which to make a reliable comparison in the current grouping and may use growers settling in previous periods to make a reliable comparison. Likewise, a specific grower may have received undesirable inputs or production practices that materially impacted the grower's performance, necessitating removal of the grower from the grouping and compensation under a non-comparison compensation method. Lastly, if the LPD groups growers based on criteria other than in the manner grouped in previous settlements, the LPD would need to set out written processes for how and when that is to be done. Settlement groupings, also called league composition, are most commonly based on their chronological availability for slaughter within the complex but could be by housing type or on other ways. Generally, the settlement is determined by flock placement timing, which commonly varies based on chronological needs by the LPD and grower. For example, one or the other may need additional layout time between flocks for cleaning, maintenance, vacation, or other similar reasons. This proposed rule would not seek to disturb that ordinary decision-making but would rather serve to identify practices or circumstances that would diverge from those ordinary reasons. While there are legitimate reasons to deviate from a strict chronological availability-based grouping, this provision is principally meant to ensure that LPDs do not inappropriately use comparison flexibility to interfere with fair comparison by intentionally grouping specific growers together to lower their pay, or to otherwise manipulate pay to deliberately benefit certain growers over others.

Under paragraph (b)(1)(iv), LPDs would be required to create written processes for how the LPD will resolve a grower's concerns with the LPD's exercise of discretion over the implementation of the policies required by this section, including the timeliness of the resolution. A tournament system cannot be fair if it fails to permit growers to contest negligent or malicious actions taken by the LPD that may impact grower performance without fear of retribution. The proposed rule would provide flexibility on how LPDs can satisfy this requirement. A range of procedures are available, such as timely communication with complex management, communication with LPD headquarters, and grower councils, wherein disputes are resolved with input from other growers. The implementation of processes to manage and resolve grower disputes can serve to alert LPDs to potential unfairness in their comparison of growers and enable them to resolve issues in a timely manner.

Section 201.110(b)(2) would require LPDs to review their compliance with the processes set forth in paragraph (b)(1) not less than once every two years. Under this requirement, (i) the reviewer must be independent of the management chain of a particular complex and qualified to conduct the review; (ii) the review must include examination of compliance practices of the complex management, production supervision, and all agents that have discretion in contract implementation, including an analysis of how often growers must be paid outside of the tournament system in order to meet the duty of fair comparison and whether the payments given were in fact greater than or equal to what the growers would otherwise have received; and (iii) the LPD must prepare a written report with the conclusions of the review, which must be based on work papers of the review and other documentation relevant to the review.

Under this proposed rule, LPDs would have a duty to monitor compliance with the processes established under paragraph (b)(1). LPDs would be required to formalize tournament operation standards and assemble either internal or external teams of reviewers to perform compliance reviews. An LPD's failure to run a tournament that provides a fair comparison between growers may result from decisions made at the complex level rather than at corporate headquarters. The requirement for periodic compliance reviews will ensure regular supervision of local complex employees' adherence to the LPD's processes. AMS anticipates that complex management will adopt practices to comply with LPD standards with respect to tournament operation. A qualified reviewer would be a person familiar with broiler growout operations who has experience analyzing the management, operations, settlement procedures, and documentation commonly used by poultry complexes of the scale and complexity being reviewed and who is familiar with and able to apply relevant principles of internal accounting controls or a comparable internal control methodology appropriate to the industry. Under this proposal, AMS would require that LPDs create a written report providing the conclusions of the compliance review to aid AMS in enforcing the requirements of this section. Section 201.110(b)(2)'s requirement that LPDs establish documented, ongoing review of compliance processes would contribute to the operation of fair tournaments by preventing harms such as LPD manipulation of prices or delivery of subpar inputs and assignment of undesirable production practices by local complex managers.

Section 201.110(b)(3) would require LPDs to retain all written records relevant to their compliance with paragraph (b) for no less than five years from the date of record creation. Relevant records would include, for example, copies of existing processes (policies and procedures); written documentation of LPD processes used within the last five years, including documentation of inputs and flock production practices provided to growers; compliance review reports covering the last five years; board minutes discussing compliance with this section for five years from the date of the board meeting; current and expired grower contracts for five years for the date of last effectiveness of the contract; disclosures provided to growers for five years from the date of the disclosure is provided to the grower; information on payments to growers or other forms of adjustment made to ensure a fair tournament, etc. Under this proposal, AMS would require that LPDs retain these records for five years to enable the Agency to monitor the evolution of compliance practices over time in this area and to ensure that records are available for what may be complex evidentiary cases. As noted Start Printed Page 49019 earlier in this section, section 401 of the P&S Act authorizes AMS to prescribe the manner and form in which LPDs keep business records. This recordkeeping requirement would enhance LPD management's ability to establish and monitor compliance, as well as AMS's ability to supervise and enforce the proposed rule.

Compliance with proposed § 201.110(b) would require LPDs to document processes for the design and operation of broiler grower ranking systems that are consistent with the duty of fair comparison. These policies and procedures are necessary to document compliance precisely because the options for delivering a fair comparison are so diverse. Policies and procedures developed pursuant to the proposed rule should describe the LPD's framework for assigning inputs and LPD-determined flock production practices, comparing grower performance, and resolving growers' concerns regarding the LPDs' implementation of its policies and procedures. Recordkeeping should enable periodic review by the LPD to examine and report on the LPD's compliance with its established written processes and, as such, with its compliance with the duty of fair comparison.

Enforcement of § 201.110 could occur in several ways. Growers could contact AMS-PSD to submit a complaint regarding an alleged violation of § 201.110. PSD would then investigate, which could lead to referral to DOJ for appropriate action or, where failure to pay is implicated, to USDA enforcement through administrative action. [ 40 ] AMS would also review LPD contracts, along with other required records from the LPD, in connection with routine compliance reviews and investigations to ensure LPD compliance. Injured individuals would also have a right to proceed directly in Federal court.

1. Does proposed § 201.110 effectively and appropriately benefit growers in reducing unfairness and deception? If so, why? If not, in what ways can it better do so?

2. Are the duty of fair comparison and the factors for evaluating whether the LPD reasonably designed its ranking system to deliver fair comparison appropriately designed? If not, how should they be changed?

3. Are the policies and procedures and the compliance review requirement effective and appropriate tools for documenting and enhancing compliance with the fair comparison duty? Why or why not? If not, what additional tools are needed? Is additional documentation on the inputs provided, timing of input delivery, and requirements for growing methods needed? Why or why not?

4. What means exist for LPDs, growers, and AMS to evaluate performance differences stemming from inputs and production practices? To the extent that information asymmetries continue to exist, please offer any views or suggestions on ways to address them.

5. How should the non-comparison methods of compensation be set to ensure that growers are fairly compensated outside of the tournament system, if needed? Should the proposed rule permit other non-comparison methods of compensation that are not specified in the broiler grower contract to be used as long as they are mutually agreed upon by both parties ( i.e., both the affected grower and the LPD)?

6. Should AMS be more specific regarding what constitutes “reasonable efforts” made by the LPD to resolve disputes, and if so, for which circumstances and how?

7. What specific burdens might LPDs face in complying with this proposed rule? Would this require LPDs to substantially modify their business model? What specific modifications would be required and why?

8. Is this proposal's standard for determining if a difference in inputs was material to grower performance— i.e., whether it meaningfully impacts pay from the perspective of the grower—appropriately designed? Should the Agency set a threshold for change in pay ( e.g., a percentage) that is always material? If so, what threshold?

9. Are there simpler means to achieve the ends proposed in § 201.110? For example, would a limitation on the proportion of comparison-based compensation to total compensation—like comparison-based compensation limited to 10 percent of total compensation—be sufficient to provide flexibility to LPDs and protect growers from variability in inputs and flock production practices?

10. Should AMS's final rule expressly clarify that a pattern or practice (including, but not limited to, intentional, arbitrary, or punitive distribution) of unequal, dissimilar, or inappropriate inputs or flock production practices would be an unfair practice under the Act under any payment system that relies upon grower performance relative to inputs or production practices provided by the LPD (such as feed efficiency) irrespective of whether the payment system was a tournament? In particular:

a. Please explain why or why not or suggest alternative approaches to address particular concerns with non-tournament pay systems that rely on grower performance.

b. Would some or all of the criteria with respect to the duty and the requirement for written processes set forth in § 201.110 be useful to address concerns with these non-tournament performance pay systems? If so, please explain under what circumstances and how.

c. Are there specific circumstances where AMS should articulate additional protection for growers against punitive actions by LPDs through the differential provision of inputs or other processes?

11. Should AMS make the effective date for the provisions of this proposed rule 180 days following publication of the final rule in the Federal Register ? If you recommend shorter or longer for some or all of the provisions, please explain why.

LPDs often request or require that growers make costly additional capital investments. These ACIs may benefit LPDs by enabling them to profit from growers' investment in more efficient technology or by otherwise enabling LPDs to meet changing consumer demand for different products (for example, because growers have invested in producing antibiotic-free chickens). ACIs may also benefit growers by enabling them to earn more in some cases.

At the same time, ACIs can be problematic. The LPD requesting an ACI may be exploiting its bargaining leverage and forcing the grower to bear unreasonable risk. The terms of the ACI may also be complicated or difficult to evaluate. Because of the tournament system, the grower's benefits may dissipate over time as other growers Start Printed Page 49020 adopt similar ACIs. In such cases, the grower may face increased debt with only a small increase in revenue. Growers, however, are often not in a financial position to avoid making an ACI. Generally, growers have already incurred debt to enter into a broiler growing arrangement. They need to repay their existing broiler-production related debts. If their LPD threatens them with termination or reduced compensation, growers may have no choice but to make the investment. Further, growers have limited options to switch to alternative LPDs, and the cost of switching LPDs can be high. Undertaking an ACI increases growers' debt, which can further increase growers' dependence on their relationship with their LPD. These problems were identified in a USDA rule published in 2011 (which added § 201.216 governing USDA's evaluation of unfairness in ACIs ( 76 FR 76874 ; December 9, 2011)) and were among the concerns raised by growers in the ANPR for this proposed rule.

Even when a grower has sufficient bargaining leverage, the LPD may not provide sufficient information for the grower to assess the risk and reward of undertaking the ACI. Many growers undertake ACIs without the opportunity to fully understand the ACI's purpose, design, risks, and impacts on their financial well-being. Information asymmetry impairs growers' ability to negotiate, effectively exercise independent decision-making to reject an ACI, and, more broadly, manage their farming operation. When information asymmetries prevent growers from evaluating whether they are able to recoup their investment or whether they can engage in other farming practices that could achieve the goals of the ACI, growers cannot effectively protect their financial interests or freely exercise decision-making with respect to their farming operation. Growers and AMS may also be unable to identify circumstances where LPDs are seeking to compete through ACI practices that shift or hide costs to growers, which subverts the competitive process.

AMS has identified as deceptive those LPD contracting practices that fail to disclose key information about ACIs. AMS emphasizes that disclosure under proposed § 201.112 is not, and is not intended to be, a remedy to unfairness in and of itself; rather, disclosure provides AMS and growers with information necessary to enforce their rights under existing § 201.216, and the P&S Act more broadly, when terms are unfair.

This section describes the problem in depth and further discusses AMS's proposed regulation to require disclosures to facilitate AMS's and growers' ability to better identify and enforce growers' rights against unfair ACIs under the existing ACI criteria in § 201.216. Lastly, this section provides questions for commenters to consider regarding the proposed regulation, including whether additional substantive limits on additional capital investments are needed in addition to the proposed disclosure.

ACIs in poultry growing facilities can improve growout productivity, satisfy customer demands related to broiler production ( e.g., animal welfare), qualify an operation for USDA's Process Verified Program, [ 41 ] and help growers conform to other product or process attributes demanded by LPDs. ACI programs, however, impose costs and risks borne largely, and often solely, by growers. Due to asset specificity and hold-up problems (discussed in section II, “Industry Background and Need for the Rulemaking”) many growers are uncomfortable taking on additional financial risk—especially absent appropriate compensation—but for all practical purposes are compelled to when LPDs unilaterally impose ACI costs and risks.

These costs and risks are particularly problematic when growers lack relevant information about the purpose, risks, and returns of the ACI. As a result, growers may be unable to protect themselves against insufficient compensation or other unfair practices including by, for example, attempting to switch LPDs. The ability to make such a switch is extremely limited because of LPD-specific housing specifications. Even when the ACI is presented as voluntary, it can be as coercive as a mandatory ACI if the grower cannot evaluate risks and rewards or if the grower has few or no options to switch to an alternative LPD. Indeed, the LPD often has substantial bargaining power: switching may be difficult or costly, alternative LPDs may not need additional growers, differing requirements may increase the cost of switching, and preexisting debt that has not been fully recouped (owing to mismatches between the duration of growers' contracts and the duration of their borrowing terms) can aggravate costs and risks to growers. Given these challenges, growers are commonly unable to negotiate with LPDs over ACIs or decline to make a particular investment and thus limit their risk.

Assuming a well-designed ACI that results in improved efficiency, failing to implement an ACI when other growers do will likely result in inherently weaker performance under the tournament. An LPD may offer an incentive payment (commonly added to base pay rates) to a grower to make a desired ACI, but growers have limited, if any, ability to negotiate those incentive payments. LPDs continually benefit from ACIs to the extent they improve production efficiency for growers or enable growers to match consumer preferences by switching to specific production processes, such as limited antibiotic usage. But any relative performance advantage gained by early adopters of an ACI will fade as other growers make the investment and gain the same productivity advantages. The incentive payments thus may not sufficiently compensate for the additional risk and cost of the debt or enable growers to fully share in the cost-savings or improvements to the product.

Further, when LPDs do not provide important information about the nature of the ACI growers cannot determine the extent to which incentive payments could be expected to compensate them for the costs of these investments. Nor can they evaluate the risks relating to the structure of those incentives—including whether the opportunity for recoupment is undermined by other growers adopting the same technology.

Without sufficient, simple, and clear disclosures, growers cannot assess the benefits or risks of making the investment. Growers cannot determine whether a program presented as voluntary is, for all practical purposes, mandatory. AMS notes that LPDs may not retaliate against a grower's refusal to engage in ACI programs—for example by the intentional delivery of subpar or inappropriate inputs or production practices—under the P&S Act.

Past grower concerns and comments in response to the ANPR add further context from both sides of this issue. The 1999 FLAG survey found that 33 percent of broiler growers believed that making improvements to housing as recommended by their LPD did not make them better off financially. As the cost of poultry growing infrastructure has increased over the past two decades, the financial risk of ACIs appears to be increasing. Multiple ANPR commenters indicated that contracts are not long enough to ensure return on costly infrastructure investments. One State farm bureau, for example, commented that upgrades of equipment and housing typically benefit the LPD at the cost of Start Printed Page 49021 the grower. Another State farm bureau commented that LPDs should provide documentation citing relevant research to justify mandatory modification of buildings and equipment and that LPDs should offer contracts for a sufficient length of time to recoup the cost of poultry growers' investment. Grower advocate organizations stated that some LPDs require poultry growers to make unnecessary upgrades and further urged AMS to consider the practice of demanding large capital investments without commensurate assurance of income from those capital investments to be an unfair and deceptive practice.

Organizations representing LPDs countered that existing protections and regulations sufficiently address this issue. A commenter on the ANPR cited the list of criteria in 9 CFR 201.216 , “Additional capital investments criteria,” that the Agency may use in considering whether capital investment requirements violate the Act. This commenter also underscored the prevalence of existing industry practices that address this issue, such as the practice of LPDs offering compensation through contract amendments to growers when they make equipment changes during the term of that contract. The commenter also stated that existing causes of action for breach of contract protect growers in cases where an LPD refuses to honor a signed contract by cancelling or modifying it.

The Agency agrees with the commenter's perspective that the existing regulation in § 201.216 may allow the Agency to partially mitigate the effects of these problems. The regulation sets forth criteria for whether ACIs would be an unfair practice or other violation of the Act. These criteria include whether the grower can decide against the ACIs; whether the ACIs were a result of coercion, retaliation, or threats by the LPD; and whether the ACIs can result in reasonable recoupment, or adequate compensation for the ACIs, among other non-exhaustive criteria. However, AMS has found that the presence of the criteria alone is insufficient to effectively address problems stemming from ACIs. AMS and growers lack the data necessary to analyze whether an ACI violates the criteria. Moreover, once an investment is made and a grower incurs debt, it can be nearly impossible to unwind. Technical specifications can make switching costly (where even possible), and alternative uses at similar compensation rates are nearly nonexistent.

A key component of the criteria, expectation of recoupment (§ 201.216(f)), is impossible to assess in the absence of reliable and accurate projections of revenue and earnings and is best evidenced by data possessed by the LPD who is asking the grower to make the ACI. Insufficient information about ACIs also, for example, impacts the criteria seeking to preserve the grower's discretion to decide against an ACI (§ 201.216(a)), in that a grower is unable to effectively analyze the extent to which without the ACI they would still be able to compete against other growers. AMS has encountered these issues in investigations regarding ACI programs.

As the practice of LPDs requiring or seeking ACIs in tournament system growing arrangements has become standard practice, Congress enacted section 208 of the Act to inform unsuspecting growers that such potential investments may be required. [ 42 ] The need for such a disclosure emphasizes the prevalence of the practice and its perceived unavoidability owing to growers' lack of reasonable alternatives and the pervasiveness of ACIs across the industry. A grower may not have meaningful opportunity to choose whether to make an ACI if a grower only has one or two LPDs to choose between, faces obstacles switching LPDs, is denied the key information needed to understand the risks and returns of the ACI, and/or fears retaliation from an LPD if it refuses an ACI.

In carefully considering this issue, AMS is concerned that some growers are unable to negotiate or refuse contracts to prevent the imposition of ACIs and that the imposition of some particular ACIs are unfair under a § 201.216 analysis. When LPDs can impose ACIs on unfair terms, they expose growers to financial risk that growers cannot mitigate during the contracting process. While the statutory ACI disclosure tells growers there is a potential risk of ACIs, the majority of contracts contain no information relating to when ACIs may be required, nor the costs of any such ACI, nor what, if any, limits there are on an LPD's ability to unilaterally impose ACIs that do not materially improve production efficiency or meet consumer demands.

AMS is also concerned that if growers are precluded from negotiating on ACIs, they also lack the ability to demand increased transparency related to ACI programs. Transparency will not cure unfairness, but it may help growers and AMS assess the risks and benefits of an ACI. For example, growers have asserted that some ACIs have been experimental in nature, which may implicate unfairness concerns in § 201.216. Compliance with these disclosures would also create the records necessary to analyze the § 201.216 criteria.

To better enable AMS and growers to protect against unfairness and deception, LPDs must disclose and record more information regarding the ACIs they request from broiler growers. The disclosures must occur before growers take on the financial burden and risks of the ACI. The provision of such information is not, in and of itself, the cure for unfairness, but rather a key tool for AMS and growers to halt abusive practices by arming them with the ability to identify those challenges sooner.

Growers bear all, or nearly all, of the costs and risks of ACIs. LPDs do not own the production capital and therefore do not share in these risks, although they frequently dictate grower investments. The system of ownership of poultry production capital provides no direct incentive for LPDs to carefully consider the extent to which the ACI will improve individual grower production efficiency, whether the ACI will result in financial benefit to growers, and whether the cost of the ACI is proportionate to any such benefits. Even when LPDs share in some of the costs by providing ACI incentive payments, the payments may not cover all the costs or risks that the grower bears. These are problems this proposed rule alone cannot and does not purport to solve; however, the disclosure required in this proposed rule will provide data points for analysis under § 201.216 that have been lacking based on AMS's experience.

When considering new investment, growers seek to maximize net productivity benefits subject to cost. However, when LPDs do not bear investment cost, they have incentives only to maximize their benefits and encourage growers to over-invest in poultry-specific production capital to the point of negative returns for the grower. LPDs' use of incentive payments to compensate growers for ACIs can help to align investment incentives. For these arrangements to work properly, however, growers must clearly understand the parameters of the investment and its future revenue potential to evaluate potentially unfair ACIs under § 201.216.

LPDs possess material information that is critical for growers and for the recordkeeping of ACI transactions. Start Printed Page 49022 When LPDs withhold important information about ACI programs, they prevent growers from making fully informed decisions, understanding the extent of over-investment, and assessing the fairness of the transaction. LPDs can exploit this information asymmetry to impede growers' ability to evaluate contracts and manage farms effectively; in more competitive markets, LPDs can impede growers' ability to compare contracts among LPDs, bargain efficiently with competing LPDs, and enforce their rights under the Act. This type of deceptive conduct results in misallocation of grower resources, enhanced LPD bargaining power, exacerbation of hold-up problems, significant financial risk to growers, and reduced competition among LPDs for grower services. An increase in grower investment also leads to increased grower dependency on LPDs to generate returns on that investment through poultry contracting. Additionally, in some cases the presence of few or no other poultry contracting options in a grower region further focuses dependence on a single LPD. The misalignment of incentives coupled with growers' inability to bargain creates deceptive and unfair conditions. These practices may amount to unfair and deceptive trade practices under an analysis informed by Packers and Stockyards Act case law and States' unfair practice laws, as well as the FTC approach to unfair practices and unfair methods of competition.

Clear disclosure of ACI parameters will enhance growers' ability to enforce their rights relating to unfair practices under § 201.216 (such as recoupment and discretion to refuse to make an ACI), as well as other provisions of the P&S Act and regulations. Disclosure alone is not a remedy for an ACI that is unfair if, for example, an LPD with the advantage of hold-up power ( e.g., there are no alternative LPDs for growers to contract with) requires an ACI that is likely to have unreasonably low or negative financial returns for growers who in good faith have invested in a long-term relationship with that LPD. Nevertheless, the disclosures required by proposed § 201.112 will create a record that will facilitate the Agency's ability to enforce the Act under § 201.216.

In section V.C. below, AMS asks commenters questions regarding proposed § 201.112 to determine whether the proposed disclosure requirement will help growers effectuate their rights under § 201.216. In that section, we are also seeking comment on whether to strengthen the substantive protections for reasonable capital investments and adopt a requirement preventing an LPD from mandating an ACI unless the cost of the required ACI can reasonably be expected to be recouped by the grower or another similar requirement to ensure that ACIs are reasonable for growers.

AMS is proposing to add new § 201.112, “Broiler grower Capital Improvement Disclosure Document,” which would require that LPDs use a Capital Improvement Disclosure Document (Disclosure Document). Paragraph (a) of the new section states that when an LPD requests that a grower make an ACI, the LPD must provide the grower with a Disclosure Document. Paragraph (b) describes the disclosures that the LPD would be required to include in the Disclosure Document. These disclosures include the purpose of the ACI and a summary of relevant research or other supporting material that the LPD has relied upon in justifying the ACI (paragraph (b)(1)). LPDs must also disclose all relevant financial incentives and compensation for the grower associated with the ACI (paragraph (b)(2)), along with all relevant construction schedules related to the request for the ACI (paragraph (b)(3). LPDs must also identify the housing specifications associated with the ACI (paragraph (b)(4)) and any required or approved manufacturers or vendors (paragraph (b)(5)). The proposed rule would also require LPDs to provide an analysis—including any assumptions, risks, or uncertainties—of projected returns the grower can expect related to the ACI sufficient to allow the grower to make their own projections (paragraph (b)(6)). Lastly, the proposed rule (in paragraph (b)(7)) would require LPDs to provide a specific statement in the Disclosure Document. The statement indicates that USDA has not verified the information contained in the Disclosure Document and that if the Disclosure Document contains any false or misleading statement or a material omission, a violation of Federal and/or State law may have occurred which may de determined to be unlawful under the P&S Act. The statement also includes contact information for use in filing a complaint with PSD and a web address to find additional information on rights and responsibilities under the Act. The specific provisions of the proposed rule are discussed in more detail below.

Proposed § 201.112(a) would require that LPDs assemble a Disclosure Document and provide the document to growers before requesting an ACI. This disclosure provision would require LPDs to make explicit representations about the nature of required ACIs. Growers would review the disclosure information provided by LPDs when making the further investment decisions contemplated by the ACI. This disclosure would not cure any unfairness in the ACI itself, but the requirement would alleviate some asymmetric information problems and better enable growers and agencies to identify problematic practices relating to ACIs including to assess and apply the criteria in § 201.216.

Information provided in the Disclosure Document would then help growers protect themselves at an earlier stage—before the investment—from unfair practices, by enabling them to report to AMS potentially unfair ACI practices or bring their own action. Improved documentation will also enable AMS to take earlier and more effective action against problematic ACI practices, owing to past insufficiency in obtaining a timely and clear understanding of the full range of costs, risks, and/or benefits relating to the ACI. Transparency will also enable some growers, where sufficient choice exists, to make better additional investment decisions. The Disclosure Document would be required to clearly state the intended and expected outcome of LPD ACI requirements. As such, LPDs would demonstrate the extent and likelihood that growers would benefit from or be put at risk by the ACI.

The requirement to provide the disclosure would be triggered when the LPD requests the grower make an ACI. At a minimum, this would occur when the LPD provides any new or modified housing specifications to the grower. AMS has chosen to utilize this timing as the trigger because capital investments generally take months, not days, to plan, finance, and operationalize, affording the grower sufficient time during the steps that advance that process forward (such as engaging in planning and borrowing) to be able to act on the information provided in the Disclosure Document, including contacting AMS to report concerns. Accordingly, providing the grower with the Disclosure Document no later than when the LPD provides any new or modified housing specifications to the grower, will provide the grower with ample opportunity and flexibility for review to effectuate their rights. Additionally, an LPD may not restrict growers from sharing the Disclosure Documents with legal counsel, accountants, family, business associates, and financial advisors or lenders.

Proposed § 201.112(b) lists the items the Disclosure Document is required to disclose. These disclosures must be Start Printed Page 49023 prominently presented in a clear, concise, and understandable manner. Paragraph (b)(1) would require that the Disclosure Document provide the purpose of the ACI for both the LPD and the grower and a summary of any relevant research or other supporting material linking the specific infrastructure modification/housing specification with that purpose. Growers, and AMS, face significant obstacles in assessing the potential costs, benefits, and risks relating to any ACI, and therefore are hamstrung in their ability to take action against problematic ACI practices. LPDs almost always have superior information regarding the outcomes of and risks around the contemplated ACI. LPDs commonly research and design ACIs and usually have a plan or intended outcomes with respect to their request for the adoption of an ACI. Growers have limited to no access to that information, yet they are asked to expend hundreds of thousands or even millions of dollars to implement ACIs.

As part of any assessment of risks or benefits relating to an ACI, growers need to understand the intended purpose of the ACI and have access to any relevant research or other supporting material regarding that ACI. Over the years and in response to the ANPR, growers have raised concerns that ACIs are often experimental, that it is difficult to determine whether ACIs are necessary, and whether ACIs would be profitable. Providing the information proposed in this paragraph would assist growers, and in turn AMS, in evaluating whether a requested or required ACI raises those concerns or other potentially unfair practices. An ACI for which the LPD does not clearly provide this information is more likely to be deceptive because growers are unable to evaluate the real purposes and material risks relating to the ACI. For example, without disclosures indicating that an ACI was designed to improve growout productivity, growers would be unable to evaluate the real implication of the structures and the incentives offered. Similarly, without disclosures indicating that an ACI was designed for animal welfare, compliance with a USDA Process Verified Program, or other similar reasons, growers would be unable to assess the risks and incentives for them to implement the ACI.

Under this proposal, LPD failure to adequately disclose this information would be deceptive and harmful to growers by imposing undue financial risk and increasing the likelihood of a poor financial outcome on the investment. Omissions of this information would prevent growers from making an informed business decision. This proposal would also help AMS and growers identify unfair practices because it would require LPDs to provide increased transparency regarding ACIs. The provision of transparency under this proposed rule is not itself a cure for the unfair practices, relief for which would be sought through separate enforcement action under § 201.216 and otherwise under the P&S Act. AMS believes that the provision of this information will assist AMS and growers in their efforts to halt unfair practices in their incipiency and potentially deter some violations.

Under proposed § 201.112(b)(2) through (5), LPDs would be required to provide clear ACI schedules and specifications to growers and state any compensation promised to growers for the ACI. Growers must plan loan repayment schedules based on expected LPD payments. Incentive payments often constitute an important component of grower repayment capacity. Paragraph (b)(2) requires the disclosure of such payments prior to the investment. LPD construction schedules, housing specifications, and approved manufacturers or vendors are critical components to any ACI. The provision of these basic details regarding the ACI would enable a grower to understand the workings, process, and design characteristics of the ACI. They thus would enable a grower to identify certain risks relating to the ACI and potentially unfair or otherwise impermissible ACI practices under § 201.116, for example, if favoritism ( e.g., to relatives of LPD employees or to certain growers) were present in the vendors chosen. Additionally, failure to provide such information is likely to be deceptive. The information is material to any contracting and investment decision, and the absence of such information is likely to mislead the grower. Therefore, AMS would require those disclosures under proposed § 201.112(b)(3) through (b)(5). LPDs harm growers when they refuse to pay promised additional compensation, discontinue a contract, or require further investment by growers to align with LPD expectations that growers fail to meet because of LPDs' initial nondisclosure.

Under § 201.112(b)(2) and (3), LPDs would be required to disclose all relevant financial incentives and compensation associated with an ACI and establish a schedule of expected grower construction for new ACIs. Financial incentives would include all incentives relating to the ACI, including explicit incentive payment additions to base pay rates or performance compensation amounts, as well as what assumptions and risks undergird or may put at risk those incentives. Clearly disclosing financial incentives would assist the grower in assessing the relative risks of non-recoupment, as the reliability of those incentives may vary based on the duration of the contract and whether other growers are likely to incorporate the ACI technology in a way that would make recoupment through performance pay less reliable. Clearly disclosing expected grower construction schedules and other repayment schedules also would assist the grower in assessing incentives and risks relating to borrowing, construction, and payment timing. Similarly, the requirement under § 201.112(b)(4) and (5) for LPDs to clearly disclose their expectations regarding housing specifications and required or approved manufacturers or vendors will position growers to better analyze the business risk in undertaking an ACI.

By enabling growers to clearly understand each component of the ACI being requested by the LPD, the disclosures proposed in § 201.112(b)(2) through (5) would address key information asymmetries that exist between the LPD and the grower with respect to LPD's purposes, bases, and expectations for an ACI. Growers will be better positioned to evaluate the true costs and risks from the ACI, as well as the operational implications for their farming enterprise.

The provision of this information is essential for AMS and for growers to identify and take action against unfair practices as contemplated under § 201.216 and otherwise. Failure to provide this information is deception because growers are asked to make investment and contracting decisions without information that is material to those decisions; the lack of this information is likely to mislead growers. Section 201.112(b)(6) would require that LPDs provide a financial analysis—including any assumptions, risks, uncertainties—that can be relied upon by growers facing ACI decisions. This provision is designed to enable the grower to evaluate the reliability of the financial returns that the grower could receive over the duration of the contract. Such information would include, where relevant, assumptions regarding the expected likelihood of whether other growers will adopt the ACI and the impacts on the reliability of returns in relation to the incentives. The financial analysis would also be expected to clearly describe the risks relating to the duration of the contract. For example, the LPD may need to take into account whether and how the LPD terminated Start Printed Page 49024 any growers without cause during the last 5 years as potentially informing those risks. That analysis may also describe the extent of any compensation provided to terminated growers ( e.g., if the remaining X number of years a contract was paid off or if any assistance was provided to reduce or pay off the remaining X number of years of a loan), and whether the LPD provided any risk-sharing mechanisms to assist it and the grower in managing changing consumer demand and preferences for poultry.

LPDs possess information about the expected returns on ACIs that producers do not have and cannot obtain independently. Therefore, LPDs exert substantial control over growers' ability to evaluate the economic and financial feasibility of an ACI while possessing the power to impose all ACI costs on growers. Growers lack the bargaining power to demand the information they need to make decisions for their financial benefit. In addition to being deceptive, inability to access this information frustrates growers' and AMS's ability to identify and therefore halt unfair practices in a timely manner. AMS has found transaction records around the financial incentives and the financial analysis insufficient to evaluate the compliance of ACIs under the Act generally.

The proposed rule would require LPDs to prepare analyses of expected grower returns for ACIs using information at their disposal about investment purpose, expected benefit, and grower performance. LPDs would provide this information and analysis to assist growers in evaluating the ACI request or requirement and to assist growers and AMS in evaluating whether LPDs have complied with the requirements of § 201.216. Growers can then review and consider this information when deciding whether to make proposed new investments and whether to pursue their rights under § 201.216 or other legal protections.

As noted above, the disclosures in proposed § 201.112 would significantly assist AMS in analyzing and applying the criteria under § 201.216. For example, an ACI with a speculative purpose or one not grounded in research and reasonable estimates—a concern that growers have reported to AMS regarding ACIs—would be more apparent if AMS and growers were able to review an LPD's representations about the purpose of an ACI, the research associated with it, and an LPD's expectation of costs, construction schedules, and approved vendors for the ACI. Such information would benefit growers in engaging in their own analysis of potential unfairness and would not otherwise be accessible to growers since the purpose and bases of an ACI are entirely under the control of the LPD. It has also proven difficult for AMS to collect this information in investigations, thus necessitating the proposed disclosures to create records of these transactions.

Additionally, these disclosures, in particular the disclosures regarding financial incentives and projected returns, would be highly valuable to AMS and growers in identifying ACI instances or programs that raise concerns relating to whether the grower, as a practical matter, could refuse to participate in an ACI; whether the ACI was a result of coercion, retaliation, or threats by the LPD; and whether the grower can reasonably recoup the investment. For example, and as discussed above, whether a grower has a reasonable opportunity to recoup the cost of the investment depends on the financial incentives, the projected returns, and the contract duration of the proposed ACI. Similarly, the grower should understand whether, and to what degree, relative performance in the tournament system determines whether the grower will recoup the investment required by the ACI. If the fixed portion of compensation is too low to cover the costs of the ACI, recoupment would be unlikely as other growers adopted similar improvements making the first grower's initially above-average performance simply average over time. Under these circumstances, the LPD (and not the growers) would obtain most or all of the benefit of efficiency gains from grower investments.

This dynamic is an additional reason why a limitation on comparison-based performance bonuses may be necessary. As discussed above under proposed § 201.106, after a referral from AMS to DOJ on a potential P&S Act violation, DOJ in cooperation with USDA reached a settlement in 2022 which limited the proportion of comparison-based performance compensation to 25% of base-plus-comparison total compensation ( i.e., compensation from the guaranteed base pay rate plus compensation from comparison-based bonuses). Other forms of performance pay were not affected, such as non-comparison-based bonuses that rewarded or incentivized performance, including to invest in more efficient technology. [ 43 ] As noted above, based on the facts and circumstances AMS is engaged in a case-by-case enforcement strategy with respect to whether performance bonuses in the tournament system can be unfair, and the existence of an ACI may affect AMS's assessment—though we have requested information under the questions to proposed § 201.106 to assess whether alternative strategies are more apt. In sum, conducting the analysis necessary to determine compliance under the Act is challenging today—especially for the grower, but also for AMS. AMS has noted limitations in the records available to conduct those analyses, especially on the timely basis necessary to protect growers being asked to enter into potentially illegal ACIs or otherwise difficult contracting decisions.

Section 201.112(b)(7) would require that LPDs include in the Disclosure Document a statement, the text of which is provided in paragraph (b)(7). The statement includes the disclosure that the Disclosure Document has not been reviewed by USDA, and that false and misleading statements or material omissions may be violations of State and/or Federal laws. The statement also indicates that violations of Federal and State laws may be determined to be unfair, unjustly discriminatory, or deceptive and unlawful under the P&S Act, as amended. AMS does not intend for the proposed Disclosure Document to be a means by which LPDs may waive any unfairness provisions in law or regulation. AMS maintains that a determination of unfairness is dependent on a facts and circumstances analysis of each case. The required statement also includes Packers and Stockyard Division contact information that growers can use to report violations and other concerns. Lastly, the statement provides website contact information for those seeking additional information on rights and responsibilities under the P&S Act.

Compliance with § 201.112 would require LPDs to include the information and topics described in § 201.112(b)(1) through (7) in the Disclosure Document and provide that document to growers when requesting an ACI.

Enforcement could occur in several ways. Growers could contact AMS-PSD to submit a complaint regarding an alleged violation of § 201.112. PSD would investigate, which could lead to referral to DOJ for appropriate action or, where failure to pay is implicated, USDA enforcement through administrative action. [ 44 ] As necessary Start Printed Page 49025 for compliance enforcement or during investigations, AMS would review Disclosure Documents to ensure completeness. Injured individuals would also have a right to proceed in Federal court.

1. Do the Capital Improvement Disclosure Document provisions of the proposed rule assist growers in identifying and appropriately addressing concerns that growers have expressed relating to ACIs? If so, why? If not, what ways can it better do so?

2. Are there specific ACI-related programs or other related conduct that LPDs engage in that are not solved by the proposed disclosures? If so, identify the conduct and whether additional disclosures, presumptions, or prohibitions would effectively address the harms from the conduct. Please explain both the problematic programs/conduct and any harms in detail.

3. What considerations, if any, should AMS take into account with respect to the timing, delivery, or readability with respect to the Disclosure Document? For example, should AMS include a provision requiring that LPDs, at the time they deliver the Disclosure Document to the grower, make reasonable efforts to assist the grower in translating the Disclosure Document and to ensure that growers are aware of their right to request such translation assistance?

4. Should proposed § 201.112(b)(5), which requires LPDs to disclose required or approved manufacturers or vendors, also require the disclosure of any material financial benefits that the LPD, or any officer, director, employee or family member of any such person, receives from the use of the required or approved vendor? If so, please explain why for each party recommended to be covered, including examples and explanation where available.

5. Proposed § 201.112(b)(6) does not include a specific format for reporting projected returns. Should LPDs be required to follow a specific format for the analysis required in § 201.112(b)(6)? If so, what individual components would be most usual to growers contemplating ACIs?

6. What other disclosures should be required of LPDs when they request or require broiler growers to make ACIs, and why? In particular, are there other disclosures that could enhance the Secretary's consideration of criteria in current regulations in § 201.216?

7. What specific burdens or obstacles might LPDs face in complying with this proposed rule? Would this require LPDs to substantially modify their business model? What specific modifications would be required and why?

8. Should disclosures or prohibitions be scaled based on the size of the investment? If so, how and based on what scaling? If so, please explain the reasons and implications for LPDs and growers?

9. What disclosures, forms, presumptions, or prohibitions could AMS require or incentivize of an LPD to align the length of any contract following an ACI with any debt that the grower undertook as part of the ACI? In particular:

a. Should AMS establish a categorical presumption of unfairness when the duration of the contract is shorter than the duration of the loan or other similar requirement?

b. What other requirements or presumptions might be needed or useful to design or enforce such a presumption? Should these relate, for example, to a grower's assignment of payments from the LPD, monitoring practices by the LPD of the grower's farm financial circumstances, the timing of ACI programs with respect to the existing loans that grower holds, or the 5-year turnover rate of growers for the LPD?

c. To what extent might such a presumption give rise to disparate treatment between growers based on the particular financial circumstances of the farm, and if presented, how much those circumstances be addressed?

d. Please provide as much specificity as possible in your responses regarding why or why not to the above items, including examples and data if possible.

10. Should AMS amend § 201.216 to revise or include additional criteria that may be considered as categorial presumptions of unfairness or otherwise as violations of the Act? Please provide as much specificity as possible in your responses regarding why or why not, including examples and data if possible. In particular:

a. Should AMS revise or include as an additional requirement that “A live poultry dealer shall not mandate an additional capital investment unless the cost of the required additional capital investment can reasonably be expected to be recouped by the poultry grower”?

b. With respect to recoupment, how should AMS evaluate factors that go into an analysis of “reasonably be expected,” such as: the costs of investments at a local complex; any variation between growers; the duration of likely borrowing by growers: the contractual terms including guaranteed and not guaranteed compensation rates and flock placements, etc.; and other factors including the extent to which they are known to the LPD?

c. Should AMS set a standard or presumption for contracts in ACI circumstances such that no less than 85, 90, or 100 percent of the projected recoupment must come from compensation methods that are not based on performance? If so, at which level and why?

AMS is proposing to add new § 201.290, “Severability,” to subpart N of part 201 to ensure that if any provision of subpart N or any component of any provision is declared invalid, or the applicability thereof to any person or circumstances is held invalid, it is AMS's intention that the validity of the remainder of this subpart or the applicability thereof to other persons or circumstances shall not be affected thereby with the remaining provision, or component of any provision, to continue in effect. Such a provision is typical in AMS regulations that cover several different topics and is included here as a matter of housekeeping.

This rulemaking proposes to add three new sections to subpart N to address different harms common in the broiler production industry: lack of payment transparency in boiler growing arrangements, unfairness in tournament operations, and lack of disclosure from LPDs regarding ACIs. Each of these provisions can operate independently in the absence of the others. Conduct that violates one provision is not dependent on protections put in place by other sections. For example, if an LPD discounts the rate of compensation provided in a broiler grower arrangement in violation of proposed § 201.106, the Agency would remain able to enforce this provision even if the provision requiring the fair operation of Start Printed Page 49026 broiler growing ranking systems (§ 201.110) were struck down. These are not inextricably connected regulations: § 201.110 focuses on establishing a fair comparison among growers in a tournament, while the focus of § 201.106 is prohibiting an LPD from reducing a grower's rate of pay from that disclosed in the contract. As another example, were the proposed provision regarding ACIs (proposed § 201.112) struck, AMS would still retain criteria under § 201.216 to evaluate whether required an ACI constitutes a violation of the P&S Act.

AMS intends for the proposed severability provision to operate to the fullest extent possible. For example, under § 201.110(b)(1), “Policies and procedures,” if the comparison flexibility requirement in paragraph (b)(1)(iii) is severed, this does not necessarily negate the benefits or make unenforceable the other processes requirements contained in paragraphs (b)(1)(i) (inputs under LPD control), (ii) (flock production practices under LPD control), and (iv) (communication and cooperation). In other words, if the benefits of a section in subpart N remain intact without the unenforceable provision, AMS's intent is to retain the enforceable provisions of the section. AMS notes that this discussion is illustrative and not exhaustive.

In accordance with the Paperwork Reduction Act of 1995 ( 44 U.S.C. chapter 35 ), AMS has requested OMB approval of new information collection and recordkeeping requirements related to this proposed rule. AMS invites comments on this new information collection. All comments received on this information collection will be summarized and included in the final request for OMB approval. Below is summary information on the burdens of these new information collection and recordkeeping requirements. Additional detail can be found in the Regulatory Impact Analysis (RIA). Comments on this section or the details in the RIA will be considered in the final rule analysis.

Title: Poultry Growing Tournament Systems: Fairness and Related Concerns.

OMB Number: 0581-NEW.

Expiration Date of Approval: This is a NEW collection.

Type of Request: Approval of a New Information Collection.

Abstract: The information collection requirements in this request are essential to improve transparency and forestall deception and unfairness in the use of broiler growing arrangements, in accordance with the purposes of the Packers and Stockyards Act, 1921. Proposed revisions to the Packers and Stockyards regulations would require that live poultry dealers (LPDs) establish, maintain, and review written documentation regarding their processes for the design and operation of a poultry grower ranking system that is consistent with the LPD duty of fair comparison, and provide information disclosures to growers when requesting that growers make additional capital investments. Under the proposal, LPDs would develop and document policies and procedures to meet a duty of fair grower comparison in tournaments and prepare written reports based on internal reviews of compliance conducted not less than once every two years. All LPD documentation will be provided to USDA on request, maintained for no less than five years, and used for ongoing internal compliance activities. The proposed rulemaking would also require that LPDs provide a Capital Improvement Disclosure Document to growers at times when LPDs request that growers make additional capital investments.

The estimates provided below apply only to LPDs that would be required to provide the information to growers or create documentation for internal use and review. Poultry growers would not be required to provide information but would be able to use the information provided by LPDs to analyze additional capital investment decisions.

Estimate of Burden: Public burden for this collection of information is estimated to average 301.89 hours per response (first year), 220.66 hours per year thereafter.

Respondents: Live poultry dealers.

Estimated Number of Respondents: 42.

Estimated Number of Responses: 188.

Estimated Number of Responses per Respondent: 4.

Estimated Total Annual Burden on Respondents: 56,756 hours in the first year, and 41,484 hours per year thereafter.

Estimate of Burden: Public burden for this collection of information is estimated to average 45.24 hours per response (first year), 16.00 hours per year thereafter.

Estimated Number of Responses: 42.

Estimated Number of Responses per Respondent: 1.

Estimated Total Annual Burden on Respondents: 1,900 hours in the first year, and 672 hours per year thereafter.

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 0.53 hours per response (first year), 0.53 hours per year thereafter.

Estimated Number of Responses: 990.

Estimated Number of Responses per Respondent: 24.

Estimated Total Annual Burden on Respondents: 526 hours in the first year, and 526 hours per year thereafter.

Comments: Comments are invited on: (1) Whether the proposed collection of the information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (2) the accuracy of the Agency's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

AMS estimates that 42 LPDs would each establish, maintain, and review documentation of written processes designed to operate a poultry grower ranking system that is consistent with a duty of fair comparison as required under proposed § 201.110. [ 45 ] AMS arrived at its estimate that four (4) responses would be produced per LPD in complying with new requirements for broiler tournament fairness policies and procedures by dividing the 188 broiler plants (or complexes) indicated in the fiscal year 2021 Annual Report filed by 42 LPDs with broiler production. [ 46 ] AMS Start Printed Page 49027 estimates first year development and production of § 201.110 policies and procedures, including legal, management, administrative, and information technology time, would require an average of 301.89 hours for each response, while ongoing annual maintenance, compliance monitoring, compliance review reporting, production, and distribution would take 220.66 hours. AMS arrived at the estimates of the number of hours per response on an annual basis to set up, produce, distribute, monitor, review, and maintain § 201.110 policies and procedures by dividing the total number of hours required (56,756 first year hours and 41,484 ongoing hours) by the annual number of responses for all LPDs (188). AMS estimated the number of hours for all LPDs to develop, produce, distribute, monitor, review, and maintain each set of processes from the number of hours estimated and the expected cost estimates in tables 6 and 7 in section VII.C., “Regulatory Impact Analysis.”

AMS estimates that 42 LPDs would each develop and document one set of processes that address communication and cooperation when resolving grower concerns as required under proposed § 201.110(b)(1)(iv). AMS estimates first year set-up and implementation of the plan, including management, legal, administrative, and information technology time, would require approximately 45.24 hours. AMS estimates ongoing annual implementation of communication, cooperation, and dispute resolution processes would require an average of 16.00 hours. AMS estimated the number of hours for all LPDs to set-up and implement each plan from the number of hours estimated and the expected cost estimates in tables 6 and 7 in section VII.C., “Regulatory Impact Analysis.”

AMS estimates each of 42 LPDs would create and distribute an average of 24 Broiler Grower Capital Improvement Disclosure Documents each year for poultry growers relating to ACIs, as required under proposed § 201.112. AMS arrived at its estimate of 24 developed disclosure documents per LPD per year from AMS records which show 42 LPDs filed fiscal year 2021 Annual Reports with AMS, and their reports indicate that they had 19,808 growing contracts with broiler growers during fiscal year 2021. Based on information provided by subject matter experts, AMS estimates that capital upgrades would be required at 5 percent of complexes each year, triggering creation of a new disclosure document for approximately 5 percent of growers annually. AMS multiplied the 19,808 growing contracts by 5 percent and divided by the 42 LPDs to arrive at 24 disclosure documents per LPD. LPDs would only be required to provide the Broiler Grower Capital Improvement Disclosure Document to growers when requesting or requiring the grower to make an ACI. AMS estimates first year and ongoing development, production, and distribution of the disclosure documents, including management, legal, administrative, and information technology time, would require an average 0.53 hours each. AMS arrived at the estimates of the number of hours on an annual basis to set up, produce, and distribute the Broiler Grower Capital Improvement Disclosure Documents by dividing the number of hours to set up, produce, and distribute the disclosures (526 first year and annual ongoing hours) by the annual number of responses for all LPDs (990). AMS estimated the number of hours for all LPDs to develop, produce and distribute each disclosure from the number of hours estimated and the expected cost estimates in table 8 in section VII.C., “Regulatory Impact Analysis.”

Proposed § 201.110 would require LPDs to provide a fair comparison among growers when basing compensation on a grouping or ranking of growers delivering during a specified period of time and would also require LPDs to document how they comply with that duty. The documentation of processes required under proposed § 201.110 must describe the manner in which the LPD performs the duty to make a fair comparison among growers when using a grower ranking system to determine compensation for broiler growers. The documentation of processes under proposed § 201.110, must also include a plan for communication and cooperation between the LPD and growers. In addition, LPDs are required to ensure compliance with the proposed rule by conducting a compliance review of each complex and producing a written report of findings no less than once every two years. LPDs are required to document, maintain, and comply with all policies and procedures required under proposed § 201.110 on an ongoing basis and provide them to USDA upon request.

Proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests existing broiler chicken growers to make an additional capital investment ($12,500 or more per structure excluding maintenance or repair). The Capital Improvement Disclosure Document must include information about the goal or purpose of the investment, financial incentives and compensation for the grower associated with the additional capital investment, all schedules and deadlines for the investment, a description of changes to housing specifications, and analysis of projected returns.

The combined costs to LPDs for compliance with the recordkeeping and disclosure requirements of proposed §§ 201.110 and 112 are expected to be $5,511,000 in the first year, and $3,821,000 in subsequent years. The total hours estimated for the LPDs to create, produce, distribute, and maintain these documents are 59,182 in the first year, and 42,682 in subsequent years. As stated previously, the estimates provided apply only to LPDs who would be required to provide the information to growers.

The amount of time required for recordkeeping and disclosure was estimated by AMS subject matter experts. These experts were auditors and supervisors with many years of experience in AMS's Packers and Stockyards Division (PSD) conducting investigations and compliance reviews of regulated entities.

AMS used the May 2022 U.S. Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics for the time values in this analysis. [ 47 ] BLS estimated an average hourly wage for general and operations managers in animal slaughtering and processing to be $61.24 per hour; $31.39 per hour for administrative assistants; $66.07 per hour for IT system managers; and $103.81 per hour for lawyers in food manufacturing. In applying the cost estimates, AMS marked-up the wages by 41.79 percent to account for fringe benefits.

AMS is issuing this proposed rule in conformance with Executive Orders 12866—Regulatory Planning and Review, 13563—Improving Regulation and Regulatory Review, and 14094—Modernizing Regulatory Review, which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits, Start Printed Page 49028 including potential economic, environmental, public health and safety effects, distributive impacts, and equity. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means.

In the development of this proposed rule, AMS considered several alternatives, which are described in the Regulatory Impact Analysis below.

The proposed rule is not expected to provide, and AMS did not estimate, any environmental, public health, or safety benefits or impacts associated with the proposed rule. We request comment on potential environmental, public health, or safety impacts of the proposed rule as well as data sources and approaches to measure their economic implications.

This proposed rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore has been reviewed by the Office of Management and Budget (OMB). Details on the estimated costs of this proposed rule can be found in the economic analysis provided in sections III.C. and D. below.

Based on its familiarity with the industry, AMS prepared an economic analysis of the proposed rule as part of the regulatory process. The economic analysis includes a cost-benefit analysis of the proposed rule. AMS then discusses the impact on small businesses.

AMS prepared an economic analysis of the costs and benefits of the proposed §§ 201.106, 110, and 112, as a required part of the regulatory process.

As described previously in the preamble for this proposed rule, the organization and structure of broiler production is characterized by a high degree of vertical integration, market power in regional markets, substantial investment in production capital that is specific to a single production purpose, nearly universal use of production contracts, and use of complex grower compensation systems based on relative performance. Market failures caused by asymmetric information, incomplete contracts, and hold-up in poultry contracting motivate specific interventions as discussed in this proposed rule.

The following analysis describes the anticipated impacts of the proposed rule. The value of broiler production in the U.S. for 2022 was approximately $50.4 billion. [ 48 ] Our analysis finds that the total quantified cost of proposed §§ 201.106, 110, and 112 will be greatest in the first year at $19.8 million or 0.039 percent of revenues. The costs are low in relation to total industry size. The proposed rule is also expected to provide many benefits of importance to broiler growers that could not be quantified. These include the value to broiler growers of improved fairness and reduced risk of fraud and deception. AMS expects potential benefits to the industry from proposed §§ 201.106, 110, and 112 to be positive.

AMS expects proposed §§ 201.106, 110, and 112 to mitigate costs associated with asymmetric information and grower unfairness and deception by establishing a duty of fair comparison for LPDs in poultry tournament administration, requiring LPDs to establish and document processes, requiring LPDs to adopt transparent methods of presenting grower compensation in broiler grower contracts, and requiring LPDs to provide important information to broiler growers. Proposed § 201.106 would prohibit the LPD from using a grower's grouping, ranking, or comparison to other growers to reduce a rate of compensation disclosed in a broiler growing arrangement. Proposed § 201.110 would require LPDs to provide a fair comparison among growers when basing compensation upon a grouping or ranking of growers delivering during a specified period of time and to document how they comply with that duty. Proposed § 201.112 would require LPDs to produce and distribute disclosures when they request growers to make additional capital investments.

AMS considered four alternatives related to the proposed §§ 201.106, 110, and 112, with the second alternative being the proposed rule. The first alternative is the “do nothing” approach or maintaining the status quo. All regulations under the Packers and Stockyards Act would remain unchanged. This first alternative forms the baseline against which AMS will compare the second alternative, proposed §§ 201.106, 110, and 112.

AMS considered a third alternative that would leave all requirements in proposed §§ 201.106, 110, and 112 the same, but entirely exempt LPDs that meet the criteria to be classified as small businesses by the Small Business Administration. [ 49 ] This third alternative would exempt smaller LPDs. However, since larger LPDs do most of the contracting (as quantified later in this analysis), most poultry growers would still receive the benefits of new protections under proposed §§ 201.106, 110, and 112. AMS considered a fourth alternative similar to proposed §§ 201.106, 110, and 112 that includes all small and large LPDs but would exclude two proposed provisions: § 201.110(b)(1)(iv) for development of new communication policies and § 201.110(b)(2) for conducting compliance reviews. Excluding these sections would reduce estimated costs of the proposed rule but would also reduce the benefits and protections afforded to growers. This fourth alternative could also reduce and limit USDA's ability to monitor and enforce rule compliance. Below, AMS provides estimates and comparisons of the costs and benefits of the alternatives and an explanation for why the Agency selected proposed §§ 201.106, 110, and 112 as the preferred alternative.

AMS expects that proposed §§ 201.106, 110, and 112 would provide benefits to growers by reducing the risk of potential fraud and deception by LPDs, improving clarity in grower payment systems, establishing a duty for fair comparison in the administration of broiler grower tournaments, and making more information available to growers. These benefits are difficult to quantify. They depend on the extent to which proposed interventions will mitigate some existing unfairness and deception that results from incomplete contracts, inadequate and asymmetric information, and hold-up problems in an environment where LPDs are able to exert market power. The size of benefits will be directly related to the extent to which the proposed rule will mitigate or reduce these practices. AMS is unable to quantify the benefits and will present a qualitative discussion of the potential types of benefits that growers would receive from proposed §§ 201.106, 110, and 112. The following discussion of non-quantifiable benefits will proceed by proposed rule section. Start Printed Page 49029

The practice of discounting or reducing disclosed contract “rates” creates problems for growers in assessing and comparing broiler production contracts. Growers commonly expect that based on ordinary efforts, they will be able to obtain at least the average rate of pay for growers in a settlement group, which is typically known as the “base” pay. If growers are evaluating the expected value of these contracts based upon “base” or “average” pay rates, downside risk, which affects half of the settlement pool per flock, would be ignored. These are the types of problems that create income expectations that are unlikely to be met for a large segment of broiler growers. Growers thus cannot effectively evaluate their risks on a settlement payment by settlement payment basis, through presentation of base pay rate at the mid-point. Growers are harmed when they incur costs as a result of entering a contract with an LPD and the actual revenue and the range of payment outcomes realized are below those the grower was led to believe they would receive when reviewing the contract based on reasonably expected efforts within the control of the grower. In addition, competition in the market for broiler grower services is harmed when such deception prevents growers from comparing competing offers from LPDs for the services of growers.

Proposed § 201.106 would apply to LPDs that determine grower compensation based upon a grouping, ranking, or comparison of growers delivering poultry during a specified period. LPDs using such a system would be prohibited from using that grouping, ranking, or comparison to reduce a rate of compensation disclosed in a broiler growing arrangement. Proposed § 201.106 requires that any performance or incentive payments made to broiler growers under a poultry ranking system must be in addition to a disclosed rate of compensation ( i.e., any adjustments to rates of pay must be non-negative). This establishes a de facto minimum payment that the grower would receive under the growing arrangement. Growers will benefit from increased certainty about the lowest possible revenue outcome under the growing arrangement. Greater certainty about minimum revenue can lead to improved financial planning and ability to manage financial risk. More transparent methods of presenting payments and compensation systems would also facilitate comparisons between alternative LPDs and benefit growers who may be evaluating offers or considering agreements from more than one LPD.

In response to proposed § 201.106, LPDs would be expected to redefine grower payment calculation systems as appropriate to express all payments in the form of bonuses added to a stated pay rate. AMS expects that existing schedules of grower payments can be recreated such that they conform to this proposed rule change. Existing LPD methods of grower payment calculation can be expressed in an alternative format that includes only bonus adjustments added to an existing minimum rate. [ 50 ] AMS is aware that several of the largest LPDs currently have existing payment systems that express all ranking bonuses as positive adjustments added to a stated pay rate and would conform to this requirement.

Changes to presentation of grower compensation rates as required by proposed § 201.106 are not expected to change the basic structure of grower compensation schedules for relative performance payments. The benefits that will accrue to growers from the proposed changes will result from increased clarity as growers will be better informed of minimum compensation outcomes that can occur under the broiler growing arrangement There is no expectation that aggregate payments to growers will increase. However, clearer presentation of grower compensation methods and will benefit growers by improving grower understanding of potential revenue outcomes, thereby reducing problems of inadequate and asymmetric information and improving the clarity of defined terms to address incompleteness in contracting.

Market power gives LPDs a considerable bargaining advantage relative to growers in poultry contracting arrangements. As a result, growers lack negotiating power to demand, among other things, transparency and completeness in contracts that would likely reduce the potential for deception and unfairness. The proposed interventions aim to reduce potential adverse impacts of market power by establishing a duty of fair comparison that would provide protections to growers that they do not have bargaining leverage to demand. Currently, most broiler production contracts are incomplete in that they fail to clearly state important terms and provisions related to grower compensation, settlement procedures, and tournament administration. LPDs frequently offer broiler contracts to growers on a take it or leave it basis, providing growers with little insight as to methods the LPD will use to compare growers for purposes of determining compensation, including whether growers will be compared to other growers provided with similar inputs and assigned similar production practices.

Lack of transparency in tournament administration and methods of determining grower compensation has led to risks of deception and unfairness. Growers are often unable to evaluate how payments under a poultry grower ranking system reflect their individual effort, measure and manage risks, and detect possible discrimination or retaliation for disputes arising under the poultry growing arrangement. Growers reasonably assume that they will be fairly compared to other growers under a broiler tournament ranking system. They will be deceived if LPDs do not make a good faith effort to ensure fair comparison among participating growers when operating broiler tournaments. Given the extent of LPD control over grower outcomes through the distribution of inputs such as feed and chicks or production practices such as placement density, target weight, etc., growers are forced to rely heavily on LPD good faith efforts in performing fair comparisons under broiler growing arrangements.

Consistent delivery of fair comparison requires LPDs to incur monitoring costs and take corrective actions when operating poultry grower ranking tournaments. In fact, many LPDs implicitly acknowledge a responsibility to fairly compare growers when they use procedures to identify and correct imbalances and provide remedies when factors beyond the growers' control affect grower payments. These include, for example, provisions to remove a grower from a tournament pool and to pay that grower according to another metric (such as a multi-flock average) if the LPD discovers that inputs provided to the grower were inferior—such as sick chicks. Another example would be a policy of the LPD to avoid providing a grower with inferior inputs on consecutive flocks—such as chicks from excessively young layer flocks that are considered to be lower performing. Although such policies are not uncommon, they are not currently required to be universally employed or uniformly applied by LPDs.

Growers also have no means by which to ensure that LPDs consistently carry out their responsibility of the contract or Start Printed Page 49030 to enforce it. Further, the benefits of monitoring and correcting for unfair grower outcomes accrue to growers and not to the LPD. Therefore, LPDs have insufficient incentive to uphold their end of the bargain, especially in markets where growers have few options of alternative LPDs with whom they could contract. LPDs can therefore essentially “hold up” growers by opportunistically minimizing their costs of delivering a fair comparison at the expense of growers and, as a result, failing to deliver on their obligation for good faith and fair dealing under the contract.

Proposed § 201.110 addresses these problems by establishing a duty for LPDs to provide a fair comparison among growers when basing compensation on a grouping or ranking of growers delivering poultry during a specified period and requiring LPDs to document how they comply with that duty. The fair comparison requirement in proposed § 201.110(a) ensures that LPDs will not compare growers to other growers who have been supplied with inputs or assigned production practices that result in material differences in performance metrics used in payment calculations. Duty of fair comparison also requires that LPDs compare growers over appropriate time periods and use appropriate non-comparison payment methods. Proposed § 201.110(b) establishes documentation requirements in the form of processes, commonly known as policies and procedures, to facilitate LPD effective tournament operation under that duty, effective recordkeeping of transactions, and facilitates AMS supervision and enforcement. These provisions would benefit growers by reducing deception and unfairness in the operation of poultry grower ranking systems.

Implementation by LPDs of written processes that promote fair comparison of growers, whether through more consistent allocation of inputs and production practices or adjustments to methods and formulas, would foster more transparent, accurate, and reliable tournaments, and greater ability to monitor and hold LPDs accountable for divergences from high standards of market integrity. Growers would benefit from this proposed regulation because they would be less vulnerable to intentional harm due to deception, retaliation, or bad faith by LPDs. An LPD, AMS, or enforcement body can more easily evaluate grower complaints of intentional harm—for example, LPD employees targeting growers by providing inferior inputs—when they are able to consider whether the LPD has complied with its own stated policies and procedures for ensuring fair comparison. Ongoing monitoring activities conducted and documented by LPDs to fulfill the duty required by proposed § 201.110(a) would also provide safeguards to prevent growers from being substantially disadvantaged by unintentional or inadvertent outcomes. For example, an LPD would take prescribed corrective action if it discovered that a particular grower had randomly received an unusual share of inferior inputs over multiple flocks. Procedures designed to ensure fair comparison would include monitoring to prevent natural variation in input quality and LPD-determined flock production practices among growers within a single settlement group from being allowed to persist as a pattern that disadvantages a particular grower over multiple settlement groups. By establishing a basic duty for LPDs to deliver fair comparison of growers, proposed § 201.110 is structured to provide LPDs flexibility in fulfilling that duty within the context of individual circumstances and complex production processes.

Benefits of § 201.110 deriving from the value to growers of fairness and equity are important. AMS is unable to quantify these benefits. However, compensation for individual growers may more closely match the level of individual grower effort, skill, and investment relative to other growers under a tournament system that guarantees fair comparison. This provision may benefit growers by removing some of the unfairness in the distribution of grower compensation within poultry ranking payment systems. When LPDs fulfill a duty to ensure fair comparisons, no individual grower would receive consistently poor inputs while other growers with whom that grower is compared receive consistently good inputs. The expected benefits of ensuring fair comparisons among growers are highlighted by the consistent widespread reports of harm to individual growers resulting from existing unfair comparisons. [ 51 ] A reduction in the occurrence of such harms could potentially lead to reduced grower turnover.

Provisions included in proposed § 201.110(b)(1)(iv) would also require LPDs to maintain written processes for communication and resolution of grower concerns with the design or operation of a system that is consistent with the duty of fair comparison. These processes should address timely resolution of such disputes. Providing an effective method of dispute resolution has the potential to help resolve disagreements involving personality conflicts which can lead to avoidable inefficiencies.

Proposed § 201.110(b)(2) would require a written review of each broiler complex at least every other year to ensure compliance with the policies and procedures developed under this section. While the proposed rule would not require that LPD documentation be distributed to growers, it would be subject to USDA review to ensure ongoing maintenance and compliance. This compliance review requirement would not provide benefits separate from those generated by establishing the duty in § 201.110(a); however, documentation of regular review of LPD procedures would assist in ongoing enforcement of the proposed rule, thereby increasing the likelihood of compliance so that benefits of the proposed rule are realized by growers.

LPDs encourage and often require broiler growers to make additional capital investments in assets that are specific to producing poultry for that LPD. Growers cannot exert bargaining power to demand essential information that would inform such investments. As a result, LPDs can induce growers to make additional investment decisions that do not benefit growers when they do not supply sufficient information for evaluation of requested upgrades. Such investments can cause financial harm to growers and increase the extent of their investments in capital that is specific to poultry production for nearby LPDs (thereby also increasing grower hold-up exposure) while still benefiting those LPDs. Moreover, broiler growers bear all the costs and risks of additional capital improvement investment. LPDs do not own the farm-based production capital and therefore do not share in these risks, although they frequently dictate grower investments. The system of ownership of poultry production capital by growers limits incentives for LPDs to carefully consider the extent to which required additional capital investments will improve individual grower production efficiency and whether they will likely lead to financial success or failure. This misalignment of incentives is consistent with grower complaints that LPDs sometimes require costly investments that are unnecessary or in some cases merely cosmetic. [ 52 ] When considering Start Printed Page 49031 new investment, broiler growers maximize net productivity benefits subject to cost. However, when LPDs do not bear investment cost, they have incentive to maximize only their benefits and encourage growers to over-invest in poultry-specific production capital to the point of negative returns for the grower.

LPDs prevent growers from making fully informed decisions and understanding the true extent of over-investment when they withhold important information about additional capital improvement investments. An increase in grower investment leads to increased grower dependency on LPDs to generate returns on that investment through poultry contracting. The presence of few or no other poultry contracting options in a grower region further focuses dependence on a single LPD. The use of incentive payments by LPDs to compensate growers for additional capital investment can help to align investment incentives. For these arrangements to work properly, growers must clearly understand the parameters of the investment and the breakdown of payment components and financial incentives offered by the LPD.

Proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document when requesting an additional capital investment over the identified threshold of $12,500 (as defined in § 201.2(n)). This disclosure would provide information to existing growers contemplating additional capital investments about the goal or purpose of the investment, grower financial incentives, construction schedules, description of changes to housing specifications, approved manufacturers or vendors, and analysis of projected returns including the assumptions, risks, and uncertainties upon which those projections are based (paragraphs (1) through (6)). As such, the Capital Improvement Disclosure Document would clearly state the intended and expected outcome of LPD additional investment requirements.

Requiring LPDs to provide this information to growers would reduce asymmetric information that contributes to inefficient investment and resource allocation decisions, where such choice exists by growers. LPDs providing this additional information related to grower requirements reduces the cost to growers of identifying and qualifying manufacturers and vendors when making capital improvements. To the extent that disclosures assist growers in understanding the purpose of ACIs, those growers will be more likely to realize any potential benefits from the ACI. For example, growers would be able to tailor ACIs to their particular operation so as to be better positioned to implement the ACI and produce intended production improvements. The clarity provided by ACI disclosure would reduce the likelihood of costly errors caused by miscommunication and misunderstanding and increase the likelihood that growers would be able to correctly implement ACIs. Proposed § 201.112 would generate economic benefits by addressing certain limitations on market functioning arising in part from asymmetric information. Growers operating with better information are less likely to be deceived or unfairly misled by LPDs when additional capital improvement investments are required.

Even where growers may not be able to avoid or negotiate around these terms, growers may be better able to effectuate their rights under the Act, and AMS would benefit from earlier identification of potentially unfair practices. To the extent that occurred, by addressing asymmetric information this section of the proposed rule would help alleviate additional hold-up of growers by LPDs. Even in cases where grower refusal may still result in other adverse consequences, growers may still be better off by preventing additional financial loss and increased specific investment and dependence on the LPD. Financial projections and other analyses of additional capital improvement investments developed by LPDs along with more complete information about investment purpose, expected benefit, and grower performance will be superior to analysis based on limited grower information.

AMS expects that the proposed rule would provide substantial benefits to the industry and address issues of extreme importance to broiler growers. However, these benefits are non-quantifiable. AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

AMS estimates cost for three alternatives. The first is the proposed §§ 201.106, 110, and 112, which is the preferred alternative. The second alternative is the same as proposed §§ 201.106, 110, and 112 with a complete exemption for LPDs that are considered small businesses by the Small Business Administration. [ 53 ] All LPDs are included in the third alternative, but the following two sub-sections of proposed § 201.110 are excluded: § 201.110(b)(1)(iv) and (b)(2). [ 54 ] All three alternatives are compared against a baseline of status quo, which has no costs or benefits.

The quantified costs of proposed §§ 201.106, 110, and 112 primarily consist of the time required for LPDs to: (1) modify grower contracts to determine compensation in a manner consistent with proposed § 201.106; (2) develop, document, and comply with policies and procedures for ensuring that growers are fairly compared to other growers in poultry grower ranking systems; and (3) gather and document information pertaining to grower additional capital investments and distribute it among the growers. The costs of the proposed rules would fall on LPDs as they modify existing contracts, develop and comply with new policies, and collect and disseminate required information. Costs would also fall on poultry growers based on the value of the time they put into reviewing the disclosures. Though poultry growers are expected to incur costs in reviewing information, they would be the primary beneficiaries of the information, which may be reflected in their ability to make more informed decisions (where they may have more than one or two integrators as options in certain geographic areas). Further, growers will be able to better identify ACI programs that are unfair, which either AMS or growers can challenge as a violation of the Packers and Stockyards Act. This may result in a more efficient allocation of capital within the poultry growing industry.

There were 42 LPDs in the broiler chicken market that filed a fiscal year 2021 Annual Report with AMS, and their reports indicate that they had 19,808 contracts with poultry growers Start Printed Page 49032 during fiscal year 2021. [ 55 ] Of these, 20 LPDs are considered small businesses according to SBA classification, and these have a total of 950 grower contracts. Small LPDs are expected to differ from large LPDs in structure and complexity, particularly with regard to the number of contract types used, management, use of legal services, and divisions of labor. Where noted below, some components of cost estimates are calculated separately for large and small LPDs to reflect these differences. [ 56 ]

AMS expects the direct costs of the proposed rule would be small in relation to overall production costs and would not measurably alter poultry supply. AMS also expects that neither LPDs nor poultry growers would measurably change any production practices that would impact the overall supply of poultry.

Expected costs are estimated as the value of the time required to develop and implement new broiler grower contracts and grower payment systems to comply with requirements of proposed § 201.106; develop, implement, and maintain compliance with processes reasonably designed by the LPD to deliver fair comparisons among broiler growers in the operation of broiler contract tournament systems as required by proposed § 201.110; and produce and distribute disclosures when LPDs request or require growers to make additional capital investments as required by proposed § 201.112, as well as the time required to create and maintain any necessary additional records. Grower payment systems required by proposed § 201.106 are substantively similar to many current payment systems already in use and will therefore not require large adjustments for most LPDs. The policies and procedures that LPDs would be required to develop in response to proposed § 201.110 are expected to result in formalization, in many cases, of existing practices LPDs are currently following, albeit sporadically or inconsistently. Nearly all of the information and records required for disclosure to growers under proposed § 201.112 are already kept by and/or available to LPDs.

Although LPDs will need to take several actions to comply with new requirements under proposed §§ 201.106, 110, and 112, this will not require LPDs to substantially change their existing business practices. Therefore, the overall added costs of adjustments, contract modifications, records creation, and compliance under the proposed rules are still expected to be small relative to the overall size of the industry.

AMS also estimates the amount of time that growers would take to review the information provided to them by LPDs. Estimates of the amount of time required by LPDs to modify existing contracts, develop and comply with new policies, and collect and distribute required information, and for growers to review the information were provided by AMS subject matter experts. These experts were supervisors and auditors with many years of experience with AMS in auditing LPDs for compliance with the Packers and Stockyards Act. Estimates for the value of time are U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics estimates released May 2022. [ 57 ]

Under proposed § 201.106, LPDs would be required to redefine grower payment calculation systems as appropriate to express all payments in the form of bonuses added to a stated pay rate. AMS expects that existing schedules of grower payments can be recreated such that they comply with this proposed rule change. Existing LPD methods of grower payment calculation can be expressed in an alternative format that includes only bonus adjustments added to from an existing minimum pay rate. AMS expects that most LPDs would be required to make one-time changes to existing grower contracts and develop new payment systems that are consistent with these provisions. This process would also include producing and filing grower documents and communicating information about the new contract and payment system to growers and staff at each complex.

AMS estimates that the aggregate one-time costs to LPDs of updating grower contracts and developing new grower payment systems, including modifying information systems to include new calculations as well as filing, and reporting to comply with proposed § 201.106, would require 18,048 legal hours, [ 58 ] 59,400 management hours, 7,520 administrative hours, and 7,520 information technology hours, costing a total of $8,854,000  [ 59 ] in the first year. [ 60 ] A more detailed breakdown of the one-time first-year costs associated with proposed § 201.106 is provided in table 5 at the end of this section.

Once LPDs have incurred a one-time cost of developing, documenting, and communicating new contracts and a new system of grower payments, AMS does not expect additional ongoing costs of implementing proposed § 201.106. Once in place, new provisions and modifications resulting from this one-time update are not expected to lead to an increase in costs associated with the ongoing maintenance and updating of grower contracts that would occur in the normal course of business.

Proposed § 201.106 concerns potential changes to the method of payment calculation used in grower tournament settlement systems. LPDs would then provide new contracts that include these updated provisions for review by broiler growers. AMS expects that for the first time a grower receives a new contract containing these modifications, he or she would require about 4 hours to review and consider all new terms and provisions. At $65.35  [ 61 ] per hour, the total one-time cost for all broiler growers to review the new contract is $5,178,000. [ 62 ] AMS expects that the updated contract provisions and payment systems developed by LPDs pursuant to § 201.106 will not contribute to additional ongoing contract review time by growers beyond an initial one-time review. Therefore, no Start Printed Page 49033 ongoing future costs of grower contract review have been included.

The ten-year aggregate total costs of proposed § 201.106 to LPDs are estimated to be $8,853,000, the ten-year aggregated total costs of proposed § 201.106 to poultry growers are estimated to be $5,178,000, and the combined ten-year aggregate total costs of proposed § 201.106 to LPDs and poultry growers are estimated to be $14,031,000.

Proposed § 201.110 would require LPDs to develop, maintain and comply with a set of policies and procedures that ensure the operation of a poultry grower ranking system that is consistent with the duty of fair comparison among growers, including describing processes for supplying or assigning inputs and production practices, communication and cooperation, and facilitating the conduct of ongoing compliance reviews with those processes.

Proposed § 201.110(a) and (b)(1)(i) through (iii) describe objectives and minimum requirements for written documentation of processes, including how LPDs will operate poultry grower ranking systems that are consistent with the duty of fair comparison. Information obtained during previous AMS investigations suggests that LPDs may already have some informal policies and practices or perhaps even some contract provisions in place to address and attempt to remedy situations in which growers have been inadvertently disadvantaged by such factors. For example, AMS is aware of situations where an LPD has removed a grower that received an unreasonable share of lower quality inputs from the grower pool and paid them by another method that would not penalize relative performance ( e.g., a five-flock average). Under proposed § 201.110(a) and (b)(1)(i) through (iii), all LPDs would be required to develop formal written processes that meet specific criteria outlined in the proposed regulation.

AMS estimates that the one-time aggregate cost of developing new policies and procedures in response to proposed § 201.110(a) and (b)(1)(i) through (iii) for LPDs will require 4,256 legal hours, 29,000 management hours, 1,504 administrative hours, and 1,504 information technology hours, costing a total of $3,352,000  [ 63 ] in the first year. Due to differences in their structure, estimates for small LPDs were calculated with the expectation that they would employ relatively fewer legal (attorney) hours that are offset by a larger share of management hours. [ 64 ] A more detailed breakdown of the one-time first-year costs associated with proposed § 201.110 is in table 6 at the end of this section.

LPDs will implement, monitor, and comply with new written processes for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison; they will also maintain and update these written processes. AMS expects these annual ongoing costs to require in aggregate 1,440 legal hours, [ 65 ] 28,952 management hours which include renewing and updating written processes at the corporate level as well as monitoring activities conducted by managers at each complex to ensure ongoing compliance, 752 administrative hours, and 752 information technology hours for an aggregate annual cost of $2,830,775. [ 66 ] A detailed breakdown of the ongoing costs associated with proposed § 201.110 is in table 7 at the end of this section.

Proposed § 201.110(b)(1)(iv) requires that the written processes developed must include a description of how LPDs communicate and cooperate to resolve grower concerns in a timely fashion. AMS expects that the aggregate one-time cost to LPDs of setting up communications and cooperation protocol and implementing them in the first year will require 848 legal hours, 544 management hours, 168 administrative hours, and 340 information technology hours  [ 67 ] for an aggregate one-time cost of $211,000. [ 68 ]

Proposed § 201.110(b)(3) states the length of time for retaining the records relevant to an LPD's compliance with proposed § 201.110(b)(1) and (2). AMS considered record retention when estimating costs for proposed § 201.110(b)(1) and (2) and proposed § 201.110(b)(3) does not impose any costs independently.

AMS expects the ongoing annual costs after the first year of implementing written processes regarding communication, cooperation, and dispute resolution policies and procedures described in proposed § 201.110(b)(1)(iv) to require, in aggregate, 336 legal hours, 168 management hours, 84 administrative hours, and 84 information technology hours for an aggregate annual cost of $76,000. [ 69 ]

Under proposed § 201.110(b)(2), LPDs would be required to conduct a compliance review of each complex no less than once every two years to ensure compliance with policies and procedures established under § 201.110 (a) and (b)(1). LPDs would need to first design a compliance review system to be used for conducting written review of compliance by complex managers, production supervisors, and field agents. Compliance reviews would then need to be conducted every two years at each complex.

AMS estimates that the aggregate one-time costs of designing and initiating the compliance review process would require 2,256 legal hours, 15,040 management hours, 752 administrative hours, and 2,444 information technology hours costing $1,900,000  [ 70 ] in the first year for LPDs to initially set up their review and compliance policies and procedures and initiate their ongoing compliance review processes.

The ongoing cost for LPDs to conduct ongoing compliance reviews for each complex every two years has been converted to an annual cost by dividing the total cost of conducting reviews on all complexes in half. This could be consistent with, for example, a system where each LPD reviews half of their complexes each year on a rolling basis or, alternatively, where a sinking fund deposit is made each year and used every other year. AMS estimates that total ongoing annual costs on the part of Start Printed Page 49034 LPDs will require 752 legal hours, 7,520 management hours, 376 administrative hours, and 940 information technology hours to conduct and document written reviews of compliance of each complex no less than once every two years, for an aggregate annual cost of $868,000. [ 71 ]

Written processes developed by LPDs are for internal use, to be complied with and maintained, to be provided to USDA, and as part of ongoing compliance review and monitoring. Under proposed § 201.110, LPDs are not required to provide additional disclosures to contract growers. Therefore, proposed § 201.110 would not impose any additional one-time or ongoing costs on growers to review additional disclosures, and total grower costs of proposed § 201.110 are zero.

The ten-year total costs of proposed § 201.110 to all 42 live broiler poultry dealers are estimated to be $39,429,000. Since expected grower costs for this section are zero, these also represent the total aggregate costs of § 201.110.

The new provisions in proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests existing broiler chicken growers to make an additional capital investment ($12,500 or more per structure excluding maintenance or repair). The Capital Improvement Disclosure Document must include information about the goal or purpose of the investment, financial incentives and compensation for the grower associated with the additional capital investment, all schedules and deadlines for the investment, a description of changes to housing specifications, and analysis of projected returns.

Proposed § 201.112 would require LPDs to create a Capital Improvement Disclosure Document when new capital investments are required of growers. Based on information provided by subject matter experts, AMS estimates that capital upgrades would be required at 5 percent of complexes each year, triggering creation of a new disclosure document for approximately 5 percent of growers annually. Therefore, AMS estimates the annual cost of creating disclosures for additional requested grower capital investment will require 75 legal hours, 376 management hours, and 75 administrative hours to create and provide a Capital Improvement Disclosure Document for all growers requiring additional capital improvement upgrades, for an aggregate annual cost of $47,000. [ 72 ] A detailed breakdown of the ongoing costs associated with proposed § 201.112 is in table 8 at the end of this section.

With the exception of acknowledging receipt, the proposed rule would not impose any requirement on poultry growers to review the information provided by LPDs, but to benefit from the Capital Improvement Disclosure Document, growers would need to review the information provided. For proposed § 201.112, AMS expects that growers would take about four hours to review these documents when they are disclosed as part of a capital improvement request or requirement by the LPD. LPDs would be required to provide disclosures to growers for any of 19,808 contracts for which additional capital investment requests are made. [ 73 ] AMS expects that LPDs will make additional capital investment requests for an average of 5 percent of grower contracts annually. At an estimated 4 hours of grower review time per disclosure at $65.35 per hour, growers' aggregate annual costs would be $259,000  [ 74 ] for reviewing documents required by § 201.112 in the first year and in each successive year.

The ten-year aggregate total costs of proposed § 201.112 to LPDs are estimated to be $471,000, the ten-year aggregated total costs of proposed § 201.112 to poultry growers are estimated to be $2,589,000, and the combined ten-year aggregate total costs of proposed § 201.112 to LPDs and poultry growers are estimated to be $3,060,000.

If AMS enforcement of proposed § 201.112 has the effect of preventing broiler growers from making unprofitable additional capital investments (those for which individual grower returns do not exceed costs), then such decisions to forgo investment will likely result in fewer benefits for LPDs, and more for growers. Because LPDs benefit from any productivity gain created by grower investments, whether or not the investment is profitable for the grower in the long-run, LPDs will not receive these benefits if additional information provided under this provision causes growers to avoid additional capital investments that they deem to be unprofitable and inefficient for their operation. AMS is not able to quantify these lost benefits to LPDs. They represent costs to LPDs, but these costs are at least partly offset by gains (or avoided losses) for growers. In addition, to the degree that an ACI requires over-investment, eliminating it benefits society. The benefits to growers and society in such cases would exceed the losses to LPDs.

Combined costs to LPDs for proposed §§ 201.106, 110, and 112 are expected to be $14,365,000 in the first year, and $3,821,000 in subsequent years. These combined costs are also reported in the Paperwork Reduction Act section as the combined costs to LPDs for compliance with the reporting and recordkeeping requirements of proposed §§ 201.106, 110, and 112. The combined costs for poultry growers are expected to be $5,437,000 in the first year and $259,000 in subsequent years.

The ten-year aggregate combined costs of proposed §§ 201.106, 110, and 112 to LPDs are estimated to be $48,753,000 and the present value of the ten-year total costs to be $42,830,000 discounted at a three percent rate and $36,691,000 at a seven percent rate. The annualized aggregate combined costs of the PV of ten-year costs to LPDs discounted at a three percent rate are expected to be $5,021,000 and $5,224,000 discounted at a seven percent rate.

The ten-year aggregate combined costs of proposed §§ 201.106, 110, and 112 to poultry growers are estimated to be $7,767,000 and the present value of the ten-year total costs to be $7,235,000 discounted at a three percent rate and $6,657,000 at a seven percent rate. The annualized aggregate combined costs of the PV of ten-year costs to poultry growers discounted at a three percent rate are expected to be $848,000 and $948,000 discounted at a seven percent rate.

The ten-year aggregate combined costs of proposed §§ 201.106, 110, and 112 to LPDs and poultry growers are estimated to be $56,520,000 and the present value of the ten-year aggregate combined costs to be $50,065,000 discounted at a three percent rate and $43,348,000 at a seven percent rate. The annualized aggregate costs of the PV of ten-year costs to LPDs and poultry growers discounted at a three percent rate are expected to be $5,869,000 and $6,172,000 discounted at a seven percent rate. The cost estimates of proposed §§ 201.106, 110, Start Printed Page 49035 and 112 presented above appear in the following table.

The value of broiler production in the U.S. for 2022 was approximately $50.4 billion. [ 75 ] Total quantified cost of proposed §§ 201.106, 110, and 112 is estimated to be greatest in the first year at $19.8 million, or 0.039 percent of revenues. A relatively small improvement in efficiency from improved allocation of capital and labor resources in the industry would more than outweigh the cost of this proposed rule. A reduction in information asymmetry (resulting in more useful information provided to growers), grower uncertainty and risk of potential adverse outcomes, and retaliatory and deceptive practices by LPDs will lead to benefits resulting from the proposed rule. The size of benefits will be directly related to the extent of these reductions. As described previously, AMS expects that the proposed rule will substantially benefit the industry and address issues of extreme importance to broiler growers. However, these benefits are non-quantifiable.

Potential benefits to the industry from proposed §§ 201.106, 110, and 112 will be positive but cannot be quantified. Thus, AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

AMS estimated costs for an alternative to the preferred option for the proposed rule. It would be the same as proposed §§ 201.106, 110, and 112, with the exception that the alternative would exempt LPDs that fall under the SBA definition of small businesses from all provisions of the two proposed rules. In the preferred alternative, the requirements in proposed §§ 201.106, 110, and 112 would apply to all LPDs, including those classified as small businesses.

The costs associated with this alternative are similar, but smaller than the preferred option. According to PSD records, small LPDs make up 47.6 percent of all LPDs, but have only 4.8 percent of poultry growing contracts. The estimation of the costs of the small business exemption alternative will follow the same format as the preferred alternative.

AMS estimates that the aggregate one-time costs to LPDs of updating grower contracts and developing new grower payment systems, including modifying information systems to include new calculations as well as filing, and reporting to comply with proposed § 201.106, would require 16,512 legal hours, 56,760 management hours, 6,880 administrative hours, and 6,880 information technology hours, costing a total of $8,310,000 in the first year under the small business exemption alternative. A more detailed breakdown of the one-time first-year costs associated with proposed § 201.106 under the small business exemption alternative is in table 9 at the end of this section. Once LPDs have incurred a one-time cost of developing, documenting, and communicating new contracts and a new system of grower payments, AMS Start Printed Page 49036 does not expect additional ongoing costs of implementing proposed § 201.106.

For proposed § 201.106, AMS expects that growers would take about 4 hours to review new contract terms and provisions when they are provided in the first year. At $65.35 per hour, the total one-time cost for all broiler growers to review the new contract under the small business exemption alternative is $4,929,000. [ 76 ] AMS expects that the updated contract provisions and payment systems developed by LPDs pursuant to proposed § 201.106 would not contribute to additional ongoing contract review time by growers beyond an initial one-time review. Therefore, no ongoing future costs of grower contract review are included.

The ten-year aggregate total costs to LPDs of proposed § 201.106 under the small business exemption alternative are estimated to be $8,310,000, the ten-year aggregate total costs to broiler growers of proposed § 201.106 for the small business exemption alternative are estimated to be $4,929,000, and the first-year and ten-year aggregate total costs to LPDs and poultry growers of proposed § 201.106 for the small business exemption alternative are estimated to be $13,239,000.

AMS estimates that the one-time aggregate cost of developing new policies and procedures in response to proposed § 201.110(a) and (b)(1)(i) through (iii) for LPDs will require 4,128 legal hours, 25,800 management hours, 1,376 administrative hours, and 1,376 information technology hours, costing a total of $3,038,000 in the first year for the small business exemption alternative. A detailed breakdown of the one-time first-year costs associated with proposed § 201.110 for the small business exemption alternative is in table 10 at the end of this section.

After new written processes have been developed, LPDs would be required to implement, monitor, and comply and to maintain and update them. AMS expects these annual ongoing costs for the small business exemption alternative to require in aggregate 1,376 legal hours, 26,488 management hours which include renewal and updating of written processes at the corporate level as well as monitoring activities conducted by managers at each complex to ensure ongoing compliance, 688 administrative hours, and 688 information technology hours for an aggregate annual cost of $2,598,000. [ 77 ] A detailed breakdown of the ongoing costs associated with proposed § 201.110 for the small business exemption alternative is in table 11 at the end of this section.

Proposed § 201.110(b)(1)(iv) requires that the written processes developed must include a description for how the LPD would resolve a grower's concerns with the LPD's design or operation of a poultry grower ranking system that is consistent with the duty of fair comparison that is required by this section, including the timeliness of the resolution. AMS expects that the aggregate one-time cost to LPDs of setting up communications and complaint resolution processes as described in § 201.110(b)(1)(iv) for the small business exemption alternative will require 528 legal hours, 264 management hours, 88 administrative hours, and 220 information technology hours for an aggregate one-time cost of $125,000. [ 78 ]

Costs associated with proposed § 201.110(b)(3), “Record retention,” are included in cost estimates for proposed § 201.110(b)(1) and (2). AMS expects that this section does not incur any additional costs.

AMS expects the ongoing annual costs of implementing communications and complaint resolution processes as described in § 201.110(b)(1)(iv) to require, for the small business exemption alternative, in aggregate, 176 legal hours, 88 management hours, 44 administrative hours, and 44 information technology hours for an aggregate annual cost of $40,000. [ 79 ]

AMS estimates that the aggregate one-time costs of designing the compliance review for the small business exemption alternative would require 2,064 legal hours, 13,760 management hours, 688 administrative hours, and 2,236 information technology hours costing $1,739,000  [ 80 ] in the first year for LPDs to initially set up their compliance review and policies and procedures.

AMS estimates that total ongoing annual costs for LPDs to conduct and document written reviews of compliance for each complex no less than once every two years will require 688 legal hours, 6,880 management hours, 344 administrative hours, and 860 information technology hours for the small business exemption alternative, for an aggregate annual cost of $795,000. [ 81 ]

Because proposed § 201.110 does not require LPDs to provide additional disclosures to contract growers, proposed § 201.110 would not impose any additional one-time or ongoing costs on growers to review additional disclosures, and total grower costs of proposed § 201.110 are also zero under the small business exemption alternative.

The ten-year total costs of proposed § 201.110 to the 52.4 percent of live broiler poultry dealers impacted under the small business exemption alternative are estimated to be $35,787,000. Since expected grower costs for this section are zero, these also represent the total aggregate costs of proposed § 201.110.

Proposed § 201.112 would require LPDs to create a Capital Improvement Disclosure Document when new capital investments are requested of growers. Based on information provided by subject matter experts, AMS estimates a five percent annual average probability that capital improvement upgrades will be required for growers at a complex, which would trigger creation of a new Disclosure Document. Therefore, AMS estimates the annual ongoing cost of creating Capital Improvement Disclosure Documents for the small business exemption alternative will require 69 legal hours, 344 management hours, and 69 administrative hours to create and provide Capital Improvement Disclosure Documents for all growers requiring additional capital improvement upgrades, for an aggregate annual cost of $43,000  [ 82 ] for the small business exemption alternative. A detailed breakdown of the ongoing costs associated with proposed § 201.110 for the small business exemption Start Printed Page 49037 alternative is in table 12 at the end of this section.

For proposed § 201.112, AMS expects that growers would take about four hours to review these documents when they are disclosed as part of a capital improvement request or requirement by the LPD. For the small business exemption alternative, LPDs would be required to provide disclosures to growers for any of the 18,858 contracts for which additional capital investment requests are made. [ 83 ] AMS expects that LPDs will make additional capital investment requests for an average of five percent of grower contracts annually. Given that growers require an estimated 4 hours at $65.35 per hour, growers' aggregate annual costs would be $246,000  [ 84 ] for reviewing documents required by proposed § 201.112 in the first year and in each successive year for the small business exemption alternative.

The ten-year aggregate total costs of proposed § 201.112 under the small business exemption alternative for LPDs are estimated to be $431,000, and the ten-year aggregated total costs to poultry growers of proposed § 201.112 under the small business exemption alternative are estimated to be $2,465,000. The combined first-year aggregate total costs to LPDs and poultry growers of proposed § 201.112 under the small business exemption alternative are estimated to be $290,000, and the ten-year aggregate total costs are estimated to be $2,895,000.

Aggregate combined costs to LPDs for proposed §§ 201.106, 110, and 112 for the small business exemption alternative are expected to be $13,254,000 in the first year, and $3,475,000 in subsequent years. The combined costs for poultry growers are expected to be $5,176,000 in the first year, $246,000 in subsequent years.

The aggregate ten-year combined quantified costs to LPDs of proposed §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $44,527,000 and the present value of the ten-year combined costs $39,135,000 discounted at a three percent rate and $33,545,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs discounted at a three percent rate are expected to be $4,588,000 and $4,776,000 discounted at a seven percent rate.

The aggregate ten-year combined costs to poultry growers of proposed §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $7,394,000 and the present value of the ten-year combined costs are estimated to be $6,888,000 discounted at a three percent rate and $6,338,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to poultry growers discounted at a three percent rate are expected to be $808,000 and $902,000 discounted at a seven percent rate.

The aggregate combined costs of proposed §§ 201.106, 110, and 112 under the small business exemption alternative for LPDs and poultry growers are estimated to be $18,430,000 in the first year and $3,721,000 in subsequent years. The aggregate ten-year combined costs to LPDs and poultry growers of proposed §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $51,922,000 and the present value of the ten-year combined costs are estimated to be $46,024,000 discounted at a three percent rate and $39,883,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs and poultry growers discounted at a three percent rate are expected to be $5,395,000 and $5,679,000 discounted at a seven percent rate. The aggregate cost estimates of proposed §§ 201.106, 110, and 112 under the small business exemption alternative presented above appear in the following table. The quantified costs to the industry in the first year under the small business exemption alternative are $18.430 million.

According to PSD records, only 4.8 percent of poultry growing contracts are between small LPDs and poultry growers. Thus, 95.2 percent of all poultry growers will receive the benefits of proposed §§ 201.106, 110, and 112 under the small business exemption alternative. AMS expects the value of non-quantified benefits to growers to exceed the costs of proposed §§ 201.106, 110, and 112 under the small business exemption alternative.

As with the preferred option, the expected value of benefits to the industry from proposed §§ 201.106, 110, and 112 will be positive but cannot be quantified in relation to the total value of industry production. Thus, AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

Though the small business exemption alternative would reduce costs to the industry, this alternative would deny the benefits offered by proposed §§ 201.106, 110, and 112 to poultry growers who contract with small LPDs. While most poultry are grown under contract with large businesses, there are many small LPDs who would be exempt from the proposed rules under the small business exemption alternative and whose growers would not benefit. Under the small business exemption alternative, these poultry growers would continue to be exposed to the informational asymmetries and other associated costs discussed above. AMS considered all four regulatory alternatives and determined that the preferred alternative is the best alternative because the benefits of the regulations will be captured by all poultry growers, regardless of the size of the LPD with which they contract.

AMS estimated costs for a third alternative to the “do nothing” option and the last of four total alternatives presented. As for the preferred option, this alternative would include all small and large LPDs, the only difference being the exclusion from the analysis of two provisions that are sub-parts of proposed § 201.110. Specifically, this alternative does not include the provision in proposed § 201.110(b)(1)(iv) requiring LPDs to develop new communications processes or the provision in proposed § 201.110(b)(2) to conduct ongoing compliance reviews. With the removal of these two provisions from the proposed rule, the estimated overall total cost for this alternative is smaller than the preferred option.

The estimation of the costs of the excluded rule sections alternative will follow the same format as the preferred alternative.

No provisions have been removed from proposed § 201.106 or § 201.112 under the excluded rule sections alternative. Therefore, AMS cost estimates are identical to those described under the preferred alternative. Detailed breakdowns of one-time and ongoing costs under this alternative are also in table 13 for proposed § 201.106 and in table 16 for § 201.112 at the end of this section.

Proposed § 201.110 would require LPDs to develop, maintain, and comply with a set of policies and procedures that are reasonably designed for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison. Two parts of proposed § 201.110 are excluded for purposes of estimating costs of the proposed rule under the excluded rule sections alternative. These exclusions are proposed § 201.110(b)(1)(iv), dealing with communication, cooperation, and dispute resolution, and proposed § 201.110(b)(2), dealing with compliance reviews.

AMS estimates that the one-time aggregate cost for LPDs to develop new processes as required in proposed § 201.110(a) and (b)(1)(i) through (iii) under the excluded rule sections alternative will require 4,256 legal hours, 29,000 management hours, 1,504 administrative hours, and 1,504 information technology hours, costing a total of $3,352,000  [ 85 ] in the first year. As discussed previously, due to differences in their structure, estimates for small LPDs were calculated with the expectation that they would employ relatively fewer legal (attorney) hours that are offset by a larger share of management hours. [ 86 ] A detailed breakdown of the one-time first-year costs associated with proposed § 201.110 under the excluded rule sections alternative is in table 14 at the end of this section.

AMS expects the annual ongoing costs of implementation, monitoring, and compliance proposed § 201.110(a) and (b)(1)(i) through (iii) under the excluded rule sections alternative to require in aggregate 1,440 legal hours, [ 87 ] 28,952 management hours which include renewal and updating of policies and procedures at the corporate level as well as monitoring activities conducted by managers at each complex Start Printed Page 49039 to ensure ongoing compliance, 752 administrative hours, and 752 information technology hours for an aggregate annual cost of $2,830,000. [ 88 ] A more detailed explanation of the ongoing costs associated with proposed § 201.110 under the excluded rule sections alternative is in table 15 at the end of this section.

Written processes developed by LPDs are for internal use, to be complied with and maintained, to be provided to USDA, and as part of ongoing internal monitoring. Under proposed § 201.110, LPDs would not be required to provide additional disclosures to contract growers. Therefore, proposed § 201.110 would not impose any additional one-time or ongoing costs on growers to review additional disclosures, and total grower costs of proposed § 201.110 under the excluded rule sections alternative are zero.

The first-year aggregate total costs of proposed § 201.110 under the excluded rule sections alternative for LPDs are estimated to be $3,352,000 and the ten-year aggregate total costs are estimated to be $28,820,000. Because expected grower costs for proposed § 201.110 are zero, the costs above also represent the total aggregate costs to LPDs of proposed § 201.110 under the excluded rule sections alternative.

Aggregate combined costs to LPDs for proposed §§ 201.106, 110, and 112 for the excluded rule sections alternative are expected to be $12,253,000 in the first year, and $2,877,000 in subsequent years. The combined costs for poultry growers are expected to be $5,437,000 in the first year, $259,000 in subsequent years.

The aggregate ten-year combined quantified costs to LPDs of proposed §§ 201.106, 110, and 112 for the excluded rule sections alternative are estimated to be $38,144,000 and the present value of the ten-year combined costs is $33,643,000 discounted at a three percent rate and $28,968,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs discounted at a three percent rate are expected to be $3,944,000 and $4,124,000 discounted at a seven percent rate.

The aggregate ten-year combined costs to poultry growers of proposed §§ 201.106, 110, and 112 for the excluded rule sections alternative are estimated to be $7,767,000 and the present value of the ten-year combined costs are estimated to be $7,235,000 discounted at a three percent rate and $6,657,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to poultry growers discounted at a three percent rate are expected to be $848,000 and $948,000 discounted at a seven percent rate.

The aggregate combined costs of proposed §§ 201.106, 110, and 112 under the excluded rule sections alternative for LPDs and poultry growers are estimated to be $17,689,000 in the first year and $3,136,000 in subsequent years. The aggregate ten-year combined costs to LPDs and poultry growers of proposed §§ 201.106, 110, and 112 for the excluded rule sections alternative are estimated to be $45,911,000 and the present value of the ten-year combined costs are estimated to be $40,878,000 discounted at a three percent rate and $35,626,000 at a seven percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs and poultry growers discounted at a three percent rate are expected to be $4,792,000 and $5,072,000 discounted at a seven percent rate. The aggregate cost estimates of proposed §§ 201.106, 110, and 112 under the excluded rule sections alternative presented above appear in the following table. The quantified costs to the industry in the first year under the excluded rule sections alternative are $17.69 million.

Though the excluded rule sections alternative would reduce costs to the industry, this alternative would deny to poultry growers the benefits offered by proposed § 201.110(b)(1)(iv) and (b)(2). Growers may be denied benefits of improved communication and the ability to pursue dispute resolution directly with LPDs when differences arise with their poultry complex management. Without a requirement for regular compliance reviews, grower confidence that LPDs are complying with policies and procedures developed to ensure fair tournament administration would be diminished. LPDs would not benefit from credibility gained by ongoing compliance reviews. Further, USDA will have substantial difficulty ensuring that LPDs are maintaining and complying with written processes developed under proposed § 201.110 without conducting specific investigations. Without effective means to enforce compliance, the resulting grower benefits from other sections of proposed § 201.110 may not be realized.

After considering all four regulatory alternatives, AMS determined that the proposed alternative is the best alternative.

The tables below provide details of the estimated costs to LPDs to comply with the proposed rule sections. AMS expects that the direct costs will consist entirely of the value of the time required to produce and distribute documentation and implement changes as described in the Regulatory Impact Analysis. AMS subject matter experts provided estimates of the average amount of time that would be necessary for LPDs to meet the elements listed in the “Regulatory Requirements” column. These experts were auditors and supervisors with many years of experience in auditing LPDs for compliance with the Packers and Stockyards Act. The estimated hours are shown by labor category for two types of LPD: those categorized as either not small or small based on SBA classification. Estimates for the value of the time are U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics estimated released May 2022. Wage estimates are marked up 41.79 percent to account for benefits. The number of poultry processing plants or complexes (172 non-small and 16 small) was tallied from the annual reports, “Annual Report of Live Poultry Dealers,” that LPDs file with AMS. [ 89 ] Expected costs for each “Regulatory Requirement” and are listed in the “Expected Cost” column. Summing the values in the “Expected Cost” column provides the total expected costs to LPDs to comply with the proposed rule under the alternative.

Details of the estimated one-time, first-year costs and on-going annual costs of providing disclosure documents required in proposed §§ 201.106, 110, and 112 under the small business exemption alternative.

Costs for the alternative that would exempt LPDs fall under the SBA definition of small businesses were estimated similarly to costs for the proposed §§ 201.106, 110, and 112. The tables below are set up the same as before and summarize expected first-year and ongoing direct costs for the 22 LPDs not categorized as small based on SBA classification to comply with each rule section.

Details of the estimated one-time, first-year costs and on-going annual costs of providing disclosure documents required in proposed §§ 201.106, 110, and 112 under the excluded rule sections alternative.

Costs for the third alternative to the status quo that would exclude proposed § 201.110(b)(1)(iv) and (2) were estimated similarly to costs for the proposed §§ 201.106, 110, and 112. The tables below provide the details of estimated one-time, first-year and ongoing costs to LPDs to comply with each non-excluded rule section under the excluded rule sections alternative.

As part of the regulatory process, a Regulatory Flexibility Analysis (RFA) is conducted in order to evaluate the effects of this proposed rule on small businesses.

AMS is proposing adding new §§ 201.106, 110, and 112 to the regulations under the Packers and Stockyards Act. The proposed § 201.106 would require live poultry dealers (LPDs) to develop and implement new broiler grower contracts and grower payment systems. Proposed § 201.110 would impose a duty on LPDs to establish and maintain compliance with written processes for the design and operation of poultry growing ranking systems consistent with a duty of fair comparison. Proposed § 201.112 would require LPDs to produce and distribute disclosures when they request growers to make additional capital investments.

Proposed § 201.106 would require that the LPD not use a grower's grouping, ranking, or comparison to others to reduce a rate of compensation disclosed in a broiler growing arrangement. As a result, AMS expects that most LPDs would be required to make one-time changes to existing grower contracts and develop new payment systems that are consistent with these provisions. This process would also include producing and filing grower documents and communicating information about the new contract and payment system to growers and staff at each complex. AMS is aware that some LPDs already have contracts in place that meet the proposed requirements.

Proposed § 201.110(a)(1) would require LPDs to provide a fair comparison among growers when basing compensation on a upon a grouping or ranking of growers delivering during a specified period. Proposed § 201.110(a)(2)(i) through (vi) describe factors that the Secretary will consider in determining whether the system was designed to deliver a fair comparison, which include: whether growers will be compared to growers supplied with inputs or assigned production practices that result in material differences in performance metrics used in payment calculations, whether growers will be compared over appropriate time periods, whether any non-comparison payment methods applied are appropriate, whether the LPD has made reasonable efforts to timely resolve concerns a grower raises regarding the LPD's design and operation of its poultry grower ranking system, and any other factor relevant to a fair comparison. Proposed § 201.110(a)(3) would require that when an LPD uses a poultry grower ranking system and cannot conduct a fair comparison for one or more growers, the LPD must compensate those growers through an appropriate non-comparison method specified in the contract that reflects reasonable compensation to the grower for its services.

Proposed § 201.110(b) would require LPDs to establish and maintain written documentation of poultry grower ranking system policies and procedures for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison. The written documentation must include policies and procedures regarding the manner in which LPDs will work to ensure a fair comparison among contract growers taking into account the distribution of inputs and assignment of production variables that are controlled by the LPD, any flexibility the LPD has in performing these comparisons, and how the LPD resolves concerns regarding the design and operation of the poultry grower ranking system by the LPD.

Under proposed § 201.110(a) and (b)(1)(i) through (iii), all LPDs would be required to develop policies and procedures that meet specific criteria outlined in the proposed regulation. Information obtained during previous AMS investigations suggests that LPDs may already have some formal or informal policies and practices or perhaps even some contract provisions in place to address and attempt to remedy situations in which growers have been disadvantaged by such factors. For example, an LPD might remove a grower that has received an unreasonable share of lower quality inputs from the grower pool and pay them by some another method that does not penalize relative performance ( e.g., a five-flock average).

Under § 201.110(b)(2), LPDs would be required to conduct a compliance review of each complex no less than once every two years to ensure compliance with policies and procedures established under § 201.110(b)(1). LPDs would need to first design a compliance review system to be used for conducting a written review of compliance by complex managers, production supervisors, and field agents. Reviews would then need to be conducted every two years at each complex.

The new provisions in proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests or requires existing broiler chicken growers to make an additional capital investment ($12,500 or more per structure excluding maintenance or repair). The Capital Improvement Disclosure Document must include information about the goal or purpose of the investment, all schedules and deadlines for the investment, a description of changes to housing specifications, and analysis of projected returns. Based on information provided by subject matter experts, AMS estimates a 5 percent annual average probability that capital improvement upgrades will be required for growers at a complex, which would trigger creation of a new disclosure document.

AMS expects the requirements in proposed §§ 201.106, 110, and 112 will protect growers from some degree of unfairness and deception by establishing a duty of fair comparison for LPDs in poultry tournament administration and requiring LPDs to establish and document policies, adopt transparent methods of presenting grower compensation in broiler grower contracts, and provide important information to broiler growers to effectuate their legal rights. By increasing transparency at key decision points and establishing a duty of fair grower comparison for LPDs, the proposed regulation would secure a more level playing field among growers. The proposed rules address key decision or financial leverage points for growers and LPDs. These include points in time when LPDs and growers agree to contracts, when LPDs present compensation schedules to growers, when LPDs allocate inputs and production practices during tournaments, and when LPDs request or require growers to make ACIs.

Market power gives LPDs a considerable bargaining advantage relative to growers in poultry contracting arrangements. As a result, growers lack negotiating power to demand, among other things, transparency and completeness in contracts and adequate LPD effort to ensure fair comparison in tournament administration that would likely reduce the potential for deception and unfairness. Currently, most broiler production contracts are incomplete in that they fail to clearly state important terms and provisions related to grower compensation, settlement procedures, and tournament administration. Providing more clear information for growers and establishing a duty for LPDs in administering tournaments would increase transparency of potential grower compensation outcomes and reduce some deception and unfairness in the operation of poultry grower ranking systems, including by enabling AMS and growers Start Printed Page 49048 to better identify potentially unfair practices that require enforcement intervention even when growers cannot otherwise avoid those practices. Additional information provided by LPDs about ACIs—including the goal and purpose, timelines, approved manufacturers and vendors, and expected returns and analyses—would help AMS and growers identify potentially unfair ACI practices early. Under some circumstances, and to some extent, it would also enable growers to make more informed business decisions and more readily avoid poor or ineffective investments that result in diminished financial opportunities. AMS acknowledges that many benefits from transparency require certain conditions that are not always present, including that multiple LPDs exist, that switching is accepted by LPDs, and that prior investments in housing design do not tie growers to certain LPDs. Further, growers are unlikely to see the full benefits of transparency when they lack reasonable alternatives. Nevertheless, transparency is likely to be more valuable in markets without unfair practices; eliminating those practices may increase the benefits of transparency for growers.

The Small Business Administration (SBA) defines small businesses by their North American Industry Classification System Codes (NAICS). [ 90 ] SBA considers broiler producers small if sales are less than $1,000,000 per year. LPDs, classified under NAICS 311615, are considered small businesses if they have fewer than 1,250 employees.

AMS maintains data on LPDs from the Annual Reports these firms file with PSD. Currently, 42 LPDs would be subject to the proposed regulation. Of these, 20 LPDs would be small businesses according to the SBA standard. In their fiscal year 2021, LPDs reported that they had 19,808 production contracts with broiler growers. Small LPDs accounted for 950 contracts (4.8 percent).

Annual Reports from LPDs indicate they had 19,808 contracts, but a poultry grower can have more than one contract. The 2022 Census of Agriculture indicated that there were 14,144 contract broiler growers in the United States. [ 91 ] AMS has no record of the number of poultry growers that qualify as small businesses but expects that nearly all of them are small businesses.

Costs of proposed §§ 201.106, 110, and 112 to LPDs would primarily consist of the time required to modify existing contracts, develop and comply with new policies, and collect and distribute it among the growers. Proposed §§ 201.106, 110, and 112 would also cost poultry growers the value of the time they put into reviewing and acknowledging receipt of new contracts and disclosures.

Expected costs are estimated as the total value of the time required by LPDs to modify existing contracts, develop and comply with new policies, and collect and distribute required disclosures that would be required by proposed §§ 201.106, 110, and 112 as well as the time to create and maintain any necessary additional records. Estimates of the amount of time required to create and distribute the disclosure documents were provided by AMS subject matter experts. These experts were auditors and supervisors with many years of experience in auditing LPDs for compliance with the Packers and Stockyards Act. Estimates for the value of the time are U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics estimate released May 2022. [ 92 ] AMS marked up the wages 41.79 percent to account for benefits.

AMS estimated one-time first-year investment to LPDs of updating grower contracts and developing new grower payment systems, including modifying information systems to include new calculations as well as filing, and reporting to comply with § 201.106 would require 1,536 legal hours at $147.19 per hour costing $226,000, 2,640 hours of management time at $86.83 per hour costing $229,000, 640 hours of administrative time at $44.51 per hour costing $28,000, and 640 hours of information technology staff time at $93.68 per hour costing $60,000. Aggregate total first-year setup costs are expected to be $544,000  [ 93 ] for proposed § 201.106. [ 94 ]

AMS estimated the total costs of developing new policies and procedures, communications plans, and compliance review systems to comply with proposed § 201.110 would require a one-time first year aggregate investment of 640 legal hours at $147.19 per hour costing $94,000, 4,760 hours of management time at $86.83 per hour costing $413,000, 272 hours of administrative time at $44.51 per hour costing $12,000, and 456 hours of information technology staff time at $93.68 per hour costing $43,000. Total aggregate first-year setup costs are expected to be $562,000  [ 95 ] for proposed § 201.110.

AMS expects that ongoing aggregate costs of implementation, maintenance, monitoring, and compliance with proposed § 201.110 would annually require an additional 288 legal hours at $147.19 per hour costing $42,000, 3,184 hours of management time at $86.83 per hour costing $276,000, 136 hours of administrative time at $44.51 per hour costing $6,000, and 184 hours of information technology staff time at $93.68 per hour costing $17,000. Total aggregate ongoing costs to small LPDs for proposed § 201.110 are expected to be $342,000 annually. [ 96 ]

Proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests existing broiler chicken growers to make an additional capital investment. [ 97 ] AMS estimated ongoing annual costs of proposed § 201.112 to small LPDs would require on average an additional 6 legal hours at $147.19 per hour costing $1,000, 32 hours of Start Printed Page 49049 management time at $86.83 per hour costing $3,000, and 6 hours of administrative time at $44.51 per hour costing $300. Total aggregate ongoing costs to small LPDs for proposed § 201.110 are expected to be $4,000 annually. [ 98 ]

Expected costs of proposed §§ 201.106, 110, and 112 are associated with developing, maintaining, updating, and complying with policies and procedures that will be implemented at poultry growing complexes and communicating changes, and producing and distributing disclosure documents among contract growers. AMS expects that firms with fewer contract types and those that contract with few growers will have lower costs. Larger LPDs will tend to have larger numbers and types of contracts and will likely have more costs. Proposed §§ 201.106 and 201.110 only concern poultry grower ranking systems. Smaller LPDs that do not have grower ranking or tournament contracts will not have any of the costs associated with proposed §§ 201.106 and 201.110. Some LPDs have few contracts with poultry growers and raise poultry in their own facilities. Those dealers will have relatively lower costs.

AMS does not regulate poultry growers, and, with the exception of reviewing and signing contracts that have been updated by LPDs to meet requirements of § 201.106 and acknowledging receipt of Capital Improvement Disclosure Documents at the time of capital investment requests, the proposed rule imposes no requirements on poultry growers. To benefit from the disclosures and to understand the updated contracts, growers would need to review the new contracts and disclosure information provided. Growers that do not expect a benefit from reviewing the disclosure information likely would not review it.

AMS estimates aggregate growers' costs for reviewing updated contracts and disclosures associated with proposed §§ 201.106 and 201.112 combined to be $261,000 in the initial year. After an updated contract has been reviewed and signed in the first year, AMS expects the annual aggregate cost for reviewing disclosures by growers making additional capital investments would be $12,000 each year. This amounts to $300 per grower in the first year. The table below summarizes costs of proposed §§ 201.106, 110, and 112 to small LPDs and small poultry growers.

LPDs report net sales in Annual Reports to AMS. Table 2 below groups small LPDs' net sales into quartiles, reports the average net sales in each quartile, and compares average net sales to average expected first-year costs per firm for each of proposed §§ 201.106, 110, and 112 and total first-year costs. [ 99 ] Estimated first-year costs are higher Start Printed Page 49050 than 10-year annualized costs, and for the threshold analysis, first-year costs will be higher than annualized costs as a percentage of net sales. Correspondingly, the ratio of ten-year annualized costs to net sales is lower than their corresponding first-year cost ratios listed in Table 2. If estimated costs meet the threshold in the first year, they will in the following years as well.

Estimated first-year costs per firm are less than 1 percent of average net sales in the three largest quartiles. Total first year costs as a percent of net sales are estimated to be about 0.5 percent for the smallest quartile. However, average first year cost per entity in Table 2 is the average cost of all of the small businesses. Costs for the LPDs in smallest quartile will likely be less than the average for small businesses.

LPDs do not report to AMS whether any of their contracts are tournament style contracts but evaluating the number contracts that LPDs listed in their Annual Reports to AMS, few of the LPDs in smallest quartile contracted with a sufficient number of growers to implement tournament contracts. It is unlikely that any of the LPDs in the smallest quartiles had any tournament contracts. It is unlikely that several of the smaller LPDs in the second quartile had any tournament contracts either.

Since proposed §§ 201.106 and 201.110 only apply to tournament contracts, none of the LPDs in the smallest quartile are likely to incur any costs from proposed §§ 201.106 and 201.110. Their costs are likely only costs associated with proposed § 201.112, which, as percentage of net sales would be 0.002 percent. Because the smallest LPDs have fewer contracts than the other small LPDs, their costs associated with proposed § 201.112 are also likely less than average.

AMS also estimated costs of an alternative proposal that excludes two sections of proposed § 201.110 from the requirements for LPDs under the proposed regulations. The alternative would not include the requirements, and therefore the associated costs, of § 201.110(b)(1)(iv) dealing with communication and cooperation and § 201.110(b)(2) dealing with compliance reviews. All sections of § 201.106 were included under the proposed alternative. AMS estimated that proposed alternative § 201.106 would require a one-time first-year investment of 1,536 legal hours at $147.19 per hour costing $226,000, 2,640 hours of management time at $86.83 per hour costing $229,000, 640 hours of administrative time at $44.51 per hour costing $28,000, and 640 hours of information technology staff time at $93.68 per hour costing $60,000. Aggregate total first-year setup costs are expected to be $544,000. AMS does not expect additional ongoing costs of implementing proposed § 201.106 under the alternative.

Two parts of § 201.110 are excluded for purposes of estimating costs of the proposed rule under the alternative for small LPDs: § 201.110(1)(iv), dealing with communication and cooperation and § 201.110(b)(2), dealing with compliance reviews. AMS estimated that proposed alternative § 201.110 would require a one-time first year aggregate investment of 128 legal hours at $147.19 per hour costing $19,000, 3,200 hours of management time at $86.83 per hour costing $278,000, 128 hours of administrative time at $44.51 per hour costing $6,000, and 128 hours of information technology staff time at $93.68 per hour costing $12,000. Total aggregate first-year setup costs for small LPDs under the alternative are expected to be $314,000.

AMS expects proposed alternative § 201.110 would annually require an additional 64 legal hours at $147.19 per hour costing $9,000, 2,464 hours of management time at $86.83 per hour costing $214,000, 64 hours of administrative time at $44.51 per hour costing $3,000, and 64 hours of information technology staff time at $93.68 per hour costing $6,000. Total aggregate ongoing costs to small LPDs for proposed § 201.110 are expected to be $232,000 annually.

All sections of § 201.112 were included under the proposed alternative. AMS estimated that first-year and ongoing annual costs of proposed § 201.112 to small LPDs would require on average an additional 6 legal hours at $147.19 per hour costing $1,000, 32 hours of management time at $86.83 per hour costing $3,000, and 6 hours of administrative time at $44.51 per hour costing $300. Total aggregate ongoing costs to small LPDs for proposed § 201.110 are expected to be $4,000 annually.

The proposed alternative would have a relatively small effect on costs to poultry growers on a per grower basis, and growers will only review the disclosures if they perceive that they are beneficial. AMS estimates growers' aggregate costs for reviewing updated contracts and disclosures associated with proposed §§ 201.106 and 201.112 combined to be $261,000 in the initial year. AMS expects the annual aggregate cost to growers making additional capital investments to be $12,000 each year. Table 3 below summarizes costs of proposed alternative §§ 201.106, 110, and 112 to small LPDs and small poultry growers. Start Printed Page 49051

Net sales for small LPDs that would be required to make disclosure under proposed alternative §§ 201.106, 110, and 112 averaged $77 million for their fiscal year 2021. Expected first-year cost per LPD would be well below 0.1 percent. [ 100 ]

Clearly, excluding §§ 201.110(b)(1)(iv) and (b)(2) would reduce cost to small LPDs, but the benefits of the proposed rule would also be less. AMS prefers §§ 201.106, 110, and 112 as proposed because it considers grower dispute resolution policies and ongoing compliance reviews to be important for ensuring the successful ongoing implementation of new policies and procedures that are designed to promote fair comparison among growers in poultry grower ranking systems. In addition, many of the smallest LPDs that do not use contracts involving poultry grower ranking systems contracts would be unaffected by proposed § 201.110.

Although costs would be smaller with the alternative, the estimated costs associated with proposed §§ 201.106, 110, and 112 are relatively small. The proposed rule seeks to require LPDs to include standardized grower Start Printed Page 49052 compensation information when using poultry grower ranking systems, formalize and follow policies and procedures to ensure fair comparisons in the administration of broiler tournaments (many or most of which will resemble existing practices), and require LPDs to provide its contract growers with information relevant to additional investment decisions. AMS has made an effort to limit disclosures to information that LPD already possessed. While proposed §§ 201.106, 110, and 112 would have an effect on a substantial number (20) of small businesses, the economic impact would be significant for only a few, if any, LPDs.

Costs to growers would be limited to the time required to review and acknowledge receipt of updated grower contracts and disclosures. AMS expects that proposed §§ 201.106, 110, and 112 would have effects on a substantial number of growers, however, the costs would not be significant for any of them. Because AMS does not regulate poultry growers, AMS does not have information regarding the business sizes of poultry growers similar to the information it has concerning LPDs. AMS invites comments concerning the sizes of poultry growing businesses and whether the costs associated with proposed §§ 201.106, 110, and 112 would have a significant effect on any of them.

Based on the above analyses regarding proposed §§ 201.106, 110, and 112, this proposed rule is not expected to have a significant economic impact on a substantial number of small business entities as defined in the Regulatory Flexibility Act ( 5 U.S.C. 601 et seq. ). While confident in this assertion, AMS acknowledges that individual businesses may have relevant data to supplement our analysis. We would encourage small stakeholders to submit any relevant data during the comment period.

Executive Order 13175 requires Federal agencies to consult with Indian Tribes on a government-to-government basis on policies that have Tribal implications. This includes regulations, legislative comments or proposed legislation, and other policy statements or actions. Consultation is required when such policies have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or the distribution of power and responsibilities between the Federal Government and Indian Tribes. The following is a summary of activity to date.

AMS engaged in a Tribal Consultation in conjunction with a previous proposed rule also under the Act (Inclusive Competition and Market Integrity Under the Packers and Stockyards Act, 87 FR 60010 ) on January 19, 2023, in person in Tulsa, Oklahoma, and virtually. AMS received multiple Tribal comments from that Consultation, many of which were specific to and considered in that rulemaking. In that consultation, Tribes raised legal concerns with respect to the jurisdiction of the AMS enforcement of the P&S Act. Tribes commented that the P&S Act does not apply to Tribes and Tribal entities. Those comments raise a legal issue of statutory interpretation, but these concerns are not directly implicated by this proposed regulation. This proposed rule provides additional standards for individual live poultry dealers or growers, and AMS does not find that this proposed rule carries substantial direct effects on one or more Indian Tribes beyond the purely legal issue raised during consultation.

AMS recognizes and supports the Secretary's desire to incorporate Tribal and Indigenous perspectives, remove barriers, and encourage Tribal self-determination principles in USDA programs, including hearing and understanding Tribal views on legal authorities and cost implications as facts and circumstances develop. If a Tribe requests additional consultation, AMS will work with USDA's Office of Tribal Relations to ensure meaningful consultation is provided in accordance with Executive Order 13175 .

This proposed rule has been reviewed under Executive Order 12988 —Civil Justice Reform. This proposed rule is not intended to have a retroactive effect. If adopted, this proposed rule would not preempt any State or local laws, regulations, or policies unless they present an irreconcilable conflict with this proposed rule. There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of this proposed rule.

AMS has considered the potential civil rights implications of this proposed rule on members of protected groups to ensure that no person or group would be adversely or disproportionately at risk or discriminated against on the basis of race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA. This proposed rule does not contain any requirements related to eligibility, benefits, or services that would have the purpose or effect of excluding, limiting, or otherwise disadvantaging any individual, group, or class of persons on one or more prohibited bases.

In its review, AMS conducted a disparate impact analysis, using the required calculations, which resulted in a finding that Asian Americans, Pacific Islanders, and Native Hawaiians were disproportionately impacted by the proposed rule, insofar as fewer farmers in those groups participate in poultry production than would be expected by their representation among U.S. farmers in general and therefore are less likely to benefit from the enhanced transparency provided by the proposed rule. The proposed regulations would provide benefits to all poultry growers. AMS will institute enhanced efforts to notify the groups found to be more significantly impacted of the regulations and their implications. AMS will conduct mitigation and monitoring strategies, and outreach will specifically target several organizations that regularly engage with or otherwise may represent the interests of these impacted groups.

USDA is committed to complying with the E-Government Act by promoting the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 104-4 ) requires Federal agencies to assess the effects of their regulatory actions of State, local, and Tribal governments, or the private sector. Agencies generally must prepare a written statement, including cost benefits analysis, for proposed and final rules with Federal mandates that may result in expenditures of $100 million or more (adjusted for inflation) in any 1 year for State, local or Tribal governments, in the aggregate, or to the private sector. UMRA generally requires agencies to consider alternatives and Start Printed Page 49053 adopt the more cost effective or least burdensome alternative that achieves the objectives of the proposed rule. This rulemaking contains no Federal mandates, as defined in Title II of UMRA, for State, local, and Tribal governments, or the private sector. Therefore, this rulemaking is not subject to the requirements of sections 202 and 205 of UMRA.

AMS invites comments on this proposed rule. Comments submitted on or before August 9, 2024 will be considered. Comments should reference Docket No. AMS-FTPP-22-0046 and the date and page number of this issue of the Federal Register . Comments can be submitted by either of the following methods:

• Federal eRulemaking Portal: Go to https://www.regulations.gov . Enter AMS-FTPP-22-0046 in the Search filed. Select the Documents tab, then select the Comment button in the list of documents.
• Postal Mail/Commercial Delivery: Send your comment to Docket No. AMS-FTPP-21-0046, S. Brett Offutt, Chief Legal Officer, Packers and Stockyards Division, USDA, AMS, FTPP; Room 2097-S, Mail Stop 3601, 1400 Independence Ave. SW, Washington, DC 20250-3601.
• Confidential business information
• Reporting and recordkeeping requirements
• Surety bonds
• Trade practices

For the reasons set forth in the preamble, AMS proposes to amend 9 CFR part 201 as follows:

1. The authority citation for part 201 continues to read as follows:

Authority: 7 U.S.C. 181-229c .

2. Add § 201.106 to subpart N to read as follows:

When a broiler growing arrangement between the live poultry dealer and the broiler grower compensates the grower based upon a grouping, ranking, or comparison of growers delivering poultry during a specified period, the live poultry dealer may not use the grower's grouping, ranking, or comparison to others to reduce any rate of compensation under the broiler growing arrangement.

3. Add § 201.110 to subpart N to read as follows:

(a) Fair comparison.— (1) Duty of fair comparison. Live poultry dealers providing compensation to broiler growers based upon a grouping, ranking, or comparison of growers delivering poultry must design and operate their poultry grower ranking system to provide a fair comparison among growers.

(2) Fair comparison factors. In determining whether the live poultry dealer reasonably designed or operated its poultry grower ranking system to deliver a fair comparison among growers or whether the live poultry dealer must utilize a non-comparison compensation method, the Secretary shall consider the following:

(i) Whether the distribution of inputs by the live poultry dealer causes material differences in performance, and whether appropriate adjustments to grower compensation will be made.

(ii) Whether the assignment of flock production practices by the live poultry dealer causes material differences in performance, and whether appropriate adjustments to grower compensation will be made.

(iii) Whether the designated time period used in the live poultry dealer's comparison is appropriate, including whether the live poultry dealer uses one or more groupings, rankings, or comparisons of growers to mitigate the effects of any differences in inputs over the designated time period.

(iv) Whether conditions and circumstances outside the control of the live poultry dealer render comparison impractical or inappropriate.

(v) Whether the live poultry dealer has made reasonable efforts to timely resolve concerns a grower raises regarding the live poultry dealer's design and operation of its poultry grower ranking system to deliver a fair comparison among growers.

(vi) Any other factor relevant to a fair comparison.

(3) Non-comparison compensation method. When a live poultry dealer uses a poultry grower ranking system and cannot conduct a fair comparison for one or more growers, the live poultry dealer must compensate those growers through a non-comparison method specified in the contract that reflects reasonable compensation to the grower for its services.

(b) Documentation. —(1) Policies and procedures. A live poultry dealer must establish and maintain written documentation of its processes for the design and operation of a poultry grower ranking system for broiler growers that is consistent with the duty of fair comparison. The written documentation must include the following:

(i) Inputs under live poultry dealer control. Processes for selecting and distributing inputs, including:

(A) How and when the live poultry dealer delivers birds, feed, medication, and any other inputs supplied by the live poultry dealer to the growers.

(B) How and when the live poultry dealer manages similarities and differences of quality and quantity in the delivery of inputs to growers.

(C) How and when the live poultry dealer identifies differences in inputs and the potential effects of those differences on grower performance.

(D) How and when the live poultry dealer adjusts the inputs the grower receives.

(E) How and when the live poultry dealer adjusts compensation calculations based on inputs the grower receives.

(ii) Flock production practices under live poultry dealer control. Processes regarding the production of live poultry, including:

(A) How and when the live poultry dealer assigns density at delivery.

(B) How and when the live poultry dealer manages pickup of birds with respect to slaughter weight and bird age, including documenting any variation by pounds and number of growout days.

(C) How and when the live poultry dealer adjusts how a grower is compared to other growers with different assigned flock production practices or otherwise adjusts the flock production practices the grower receives.

(D) How and when the live poultry dealer adjusts compensation calculations based on the flock production practices the grower receives.

(E) How and when the live poultry dealer minimizes, adjusts, or otherwise accounts for differences in production practices.

(iii) Comparison flexibility. Processes describing the live poultry dealer's grower comparison flexibility, including:

(A) If the live poultry dealer evaluates fair comparison of growers over one or more groupings or rankings (rather than within each grouping or ranking), how the dealer sets a reasonable time period over which the duty of fair comparison is fulfilled.

(B) If the live poultry dealer removes growers from a ranking group, the dealer must describe when growers are removed and how the live poultry dealer compensates the growers to satisfy the non-comparison Start Printed Page 49054 compensation method under paragraph (a)(3) of this section.

(C) If the live poultry dealer groups growers for settlement in any manner other than the one used in recent settlements, how the dealer determines such groupings.

(iv) Communication and cooperation. Processes for how the live poultry dealer resolves a grower's concerns with the design or operation of a poultry grower ranking system for broiler growers that is consistent with the duty of fair comparison, including the timeliness of the resolution.

(2) Compliance review. Not less than once every 2 years, the live poultry dealer must review its compliance with the processes set forth in paragraph (b)(1) of this section.

(i) The reviewer must be independent of the management chain of a particular complex and qualified to conduct the review.

(ii) The review must include examination of compliance practices of the complex management, production supervision, and all agents that have discretion in contract implementation.

(iii) The live poultry dealer must prepare a written report with the conclusions of the review, which must be based on work papers of the review and other documentation relevant to the review.

(3) Record retention. The live poultry dealer must retain all written records relevant to its compliance with this paragraph (b) for no less than 5 years from the date of record creation.

4. Add § 201.112 to subpart N to read as follows:

(a) When a live poultry dealer requests that a broiler grower make an additional capital investment, the live poultry dealer must provide the broiler grower with a Capital Improvement Disclosure Document, as described in paragraph (b) of this section.

(b) The Capital Improvement Disclosure Document must disclose the following in a clear, concise, and understandable manner:

(1) The purpose of the additional capital investment for both the live poultry dealer and the grower, and a summary of any relevant research or other supporting material that the live poultry dealer has relied upon in justifying the additional capital investment.

(2) All relevant financial incentives and compensation for the grower associated with the additional capital investment.

(3) All relevant construction schedules related to the request for additional capital investment.

(4) The housing specifications associated with the additional capital investment.

(5) Any required or approved manufacturers or vendors.

(6) An analysis—including any assumptions, risks, or uncertainties—of projected returns the grower can expect related to the additional capital investment sufficient to allow the grower to make their own projections.

(7) This statement that “USDA has not verified the information contained in this document. If this disclosure by the live poultry dealer contains any false or misleading statement or a material omission, a violation of Federal and/or State law may have occurred. Violations of Federal and State laws may be determined to be unfair, unjustly discriminatory, or deceptive and unlawful under the Packers and Stockyards Act, as amended. You may file a complaint at farmerfairness.gov or call 1-833-DIAL-PSD (1-833-342-5773) if you suspect a violation of the Packers and Stockyards Act or any other Federal law governing fair and competitive marketing, including contract growing, of livestock and poultry. Additional information on rights and responsibilities under the Packers and Stockyards Act may be found at www.ams.usda.gov .”

5. Add § 201.290 to subpart N to read as follows:

If any provision of this subpart or any component of any provision is declared invalid, or the applicability thereof to any person or circumstances is held invalid, it is the Agricultural Marketing Service's intention that the validity of the remainder of this subpart or the applicability thereof to other persons or circumstances shall not be affected thereby with the remaining provision, or component of any provision, to continue in effect.

Erin Morris,

Associate Administrator, Agricultural Marketing Service.

1.  The comment period ended September 6, 2022. In response to industry organizations' request for additional time to submit comments, AMS reopened the comment period on September 9, 2022 ( 87 FR 55319 ). That comment period closed September 26, 2022.

2.  Letter from FTC Chair Lina Khan to AMS, “Poultry Grower Tournament Systems: Fairness and Related Concerns,” Docket No. AMS-FTPP-22-046, at https://www.regulations.gov/​comment/​AMS-FTPP-22-0046-0143 ; Michael Kades, “Protecting livestock producers and chicken growers,” Washington Center for Equitable Growth (May 2022).

3.  See, e.g., New Farmer's Guide to the Commercial Broiler Industry: Farm Types & Estimated Business Returns—Alabama Cooperative Extension System (aces.edu).

4.  USDA, NASS. 2022 Census of Agriculture: United States Summary and State Data. Volume1, Part 51. Issued February 2024 p. 51 and p.411. https://www.nass.usda.gov/​Publications/​AgCensus/​2022/​Full_​Report/​Volume_​1,_​Chapter_​1_​US/​usv1.pdf .

5.  Growout period is defined as the period of time between placement of poultry at a grower's facility and the harvest or delivery of such animals for slaughter, during which the feeding and care of such poultry are under the control of the grower.

6.  See, for example, Cunningham and Fairchild (November 2011) Op. Cit.; Simpson, Eugene, Joseph Hess and Paul Brown, Economic Impact of a New Broiler House in Alabama, Alabama A&M & Auburn Universities Extension, March 1, 2019 (estimating a $479,160 construction cost for a 39,600 square foot broiler house).

7.  For a discussion of the difficulty in adapting of broiler grow houses for other purposes, see Vukina and Leegomonchai 2006, Op. Cit.

8.  MacDonald, James M. “Financial Risks and Incomes in Contract Broiler Production.” Amber Waves August 4, 2014. https://www.ers.usda.gov/​amber-waves/​2014/​august/​financial-risks-and-incomes-in-contract-broiler-production/​ (last accessed 12/13/2023).

9.  For a discussion the difficulty in adapting of broiler grow houses for other purposes see Tom Vukina and Porametr Leegomonchai. “Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry.” American Journal of Agricultural Economics 88 (2006).

10.  MacDonald, James M. 2014. Technology, Organization, and Financial Performance in U.S. Broiler Production, EIB-126, USDA Economic Research Service.

11.  The term “integrator” used in MacDonald (June 2014) refers to a vertically integrated poultry company that contracts with farmers who serve as growers. LPDs referenced elsewhere in this document are also “integrators.”

12.  James M. MacDonald and Nigel Key. “Market Power in Poultry Production Contracting? Evidence from a Farm Survey.” Journal of Agricultural and Applied Economics 44 (November 2012): 477-490.

13.  LPDs exercise discretion in fulfilling the contract terms when operating a tournament by, for example, choosing which growers to be included in a settlement group or whether appropriate comparable growers are available for comparison purposes.

14.  For a discussion of hold-up in the broiler industry, see Vukina and Leegomonchai (2006), Op. Cit.

15.  Ibid.

16.  James M. MacDonald, “Technology, Organization, and Financial Performance in U.S. Broiler Production.” U.S. Department of Agriculture Economic Research Service, Economic Information Bulletin No. 126 (June 2014).

17.  There is some inconsistency in the use of payment terms across broiler contracts at different companies or complexes. Most grower contracts define the term base pay rate as it is described in this paragraph. However, some contracts instead use the term base pay when referring to a fixed amount plus the performance adjustment.

18.  See, e.g., “How the Tournament System Works”, National Chicken Council (informing farmers that: “1 All farmers are provided the same quality of chicks, the same feed, and access to veterinary care. 2 Farmers who invest in more advanced facilities, as well as use the best management practices will likely produce higher quality chickens more efficiently. 3 Farmers receive a base pay (per their contract) and potentially a bonus, based on the health and quantity of the flock (tournament system).”); available at https://www.chickencheck.in/​faq/​tournament-system/​ (last accessed May 22, 2024).

19.  Knoeber and Thurman show that tournaments shift most of the risks of broiler production from broiler growers to LPDs relative to a fixed payment system. See Knoeber, C.R. and W.N. Thurman. “ `Don't Count Your Chickens . . .': Risk and Risk Shifting in the Broiler Industry,” American Journal of Agricultural Economics 77 (August 1995) p. 486-496.

20.  See “A Bird's Eye View of How Chicken Farmers Are Paid”, National Chicken Council (informing farmers that: “All farmers are guaranteed a base pay from the chicken company per their contract.”; “No matter what, farmers get paid.”; and “Bonuses are given to farmers who raise healthy flocks and invest in their farm. This is referred to as the tournament system.”); available at https://www.chickencheck.in/​faq/​tournament-system/​ (last accessed May 22, 2024).

21.  See Transcript, United States Department of Justice, United States Department of Agriculture, Public Workshops Exploring Competition in Agriculture: Poultry Workshop May 21, 2010, Normal, Alabama.

22.  Grain Inspection, Packers and Stockyards Administration (GIPSA), USDA, “Implementation of Regulations Required Under Title XI of the Food, Conservation and Energy Act of 2008; Conduct in Violation of the Act,” 75 FR 35338 (June 22, 2010) and “Poultry Grower Ranking Systems,” 81 FR 92723 (Dec. 20, 2016).

23.  Rural Advancement International Foundation—USA, “Letter to S. Brett Offutt, Packers and Stockyards Division, USDA-AMS, Fair Trade Practices Program,” Filed as a comment to “Poultry Grower Tournament Systems: Fairness and Related Concerns,” Sept. 2022, pp. 15-18, available at https://www.rafiusa.org/​blog/​comments-on-poultry-tournament-system/​ ; https://www.rafiusa.org/​wp-content/​uploads/​2022/​09/​RAFI-USA-Comment-on-Poultry-Growing-Tournament-System-Fairness.pdf .

24.  James MacDonald and Nigel Key, Economic Research Services, USDA, “Market Power in Poultry Production Contracting? Evidence from a Farm Survey,” Journal of Agricultural and Applied Economics, November 2012, 44(04):477-490, available at https://www.researchgate.net/​publication/​305948391_​Market_​Power_​in_​Poultry_​Production_​Contracting_​Evidence_​from_​a_​Farm_​Survey .

25.   See United States v Cargill Meat Solutions Corp. et al. Civil Action No.: 1:22-cv-1821, District of Maryland, Final Judgement entered June 5, 2023.

26.  The 1999 survey was conducted by Lee Schrader of Purdue University and John Wilson of Duke University and included responses from over a thousand broiler growers in ten of the largest broiler-growing States (Alabama, Arkansas, Delaware, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Texas, and Virginia). This survey is cited frequently in this document because it included questions meant to assess the impact of broiler company practices on growers in contract poultry production. Although the survey is older, it was conducted by respected academic experts and provides information on the experiences of a broad sample of growers and covers specific questions of concern in this rulemaking. Based on AMS's experience, the survey is still relevant and useful as a reasonable reflection of the views of growers today. Lee Schrader and John Wilson, “Broiler Grower Survey Report,” in Farmers' Legal Action Group, Assessing the Impact of LPD Practices on Contract Poultry Growers, ed. Farmers' Legal Action Group (FLAG Survey) (September 2001). http://www.flaginc.org/​publication/​assessing-the-impact-of-LPD-practices-on-contract-poultry-growers/​ , last accessed 07/28/2023.

27.  WATT PoultryUSA Top Companies Survey, 2021; www.WATTPoultry.com ; accessed 12/13/2023.

28.  Benoliel, U. and J. Buchan. “Franchisees' Optimism Bias and the Inefficiency of the FTC Franchise Rule.” DePaul Business and Commercial Law Journal 2015 13(3): p. 414.

29.  See e.g. Michael Kades, “Protecting livestock producers and chicken growers,” Washington Center for Equitable Growth (May 2022), discussing FTC Policy Statement on Unfairness, 1980, available at https://www.ftc.gov/​legal-library/​browse/​ftc-policy-statement-unfairness (last accessed Jan. 2024); Federal Trade Commission: Policy Statement on the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, Nov. 2022, available at https://www.ftc.gov/​legal-library/​browse/​policy-statement-regarding-scope-unfair-methods-competition-under-section-5-federal-trade-commission .

30.  See United States v Cargill Meat Solutions Corp. et al. Civil Action No.: 1:22-cv-1821, District of Maryland, Final Judgement entered June 5, 2023.

31.  Ibid.

32.   See, e.g., generally 9 CFR 201.100 , 9 CFR 201.215-218 .

33.  Wayne-Sanderson, DOJ Consent Decree, June 25, 2022, available at https://www.justice.gov/​opa/​pr/​justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy .

34.  Additional information on reporting violations of the P&S Act can be found here: https://www.ams.usda.gov/​services/​enforcement/​psd/​reporting-violations (last accessed 11/13/2023).

35.  See, e.g., “How the Tournament System Works”, National Chicken Council (informing farmers that: “1 All farmers are provided the same quality of chicks, the same feed, and access to veterinary care.”; available at https://www.chickencheck.in/​faq/​tournament-system/​ (last accessed May 22, 2024).

36.  Rural Advancement Foundation International-USA, “Comment on AMS-FTPP-22-0046: Poultry Growing Tournament Systems: Fairness and Related Concerns” (received Sept. 26, 2022), available at https://www.regulations.gov/​comment/​AMS-FTPP-22-0046-0166 .

37.  Dozier III, W.A., et al. “Stocking Density Effects on Growth Performance and Processing Yields of Heavy Broilers,” Poultry Science 84 (2005): 1332- 1338; Puron, Diego et al. “Broiler performance at different stocking densities.” Journal of Applied Poultry Research 4.1:55-60 (1995). Burke, William and Peter J. Sharp. “Sex Differences in Body Weight of Chicken Embryos.” Poultry Science 68.6 (1989): 805-810; Beg, Mah, et al. Effects of Separate Sex Growing on Performance and Metabolic Disorders of Broilers. Diss. Faculty of Animal Science and Veterinary Medicine, Sher-e-Bangla Agricultural University, Dhaka, Bangladesh, 2016; Wilson, H.R. “Interrelationships of Egg Size, Chick Size, Posthatching Growth and Hatchability.” World's Poultry Science Journal 47.1 (1991): 5-20; Washburn, K.W., and R.A. Guill. “Relationship of Embryo Weight as a Percent of Egg Weight to Efficiency of Feed Utilization in the Hatched Chick.” Poultry Science 53.2 (1974): 766-769; Weatherup, S.T.C., and W.H. Foster. “A Description of the Curve Relating Egg Weight and Age of Hen.” British Poultry Science 21.6 (1980): 511-519; University of Kentucky/Kentucky Poultry Federation, Poultry Production Manual, https://afs.ca.uky.edu/​poultry/​production-manual (uky.edu), last accessed 08/21/2023.

38.  Cobb500TM Broiler Performance & Nutrition Supplement (2022), Cobb-Vantress; Cobb700TM Broiler Supplement, Cobb-Vantress, 2022; Ross 308/Ross 308FF Broiler Performance Objectives 2019, Aviagen Ross, http://eu.aviagen.com/​tech-center/​download/​1339/​Ross308-308FF-BroilerPO2019-EN.pdf , accessed March 25, 2022.

39.   See, e.g., Dkt. No. 12-0123 (USDA March 8, 2013).

40.  Additional information on reporting violations of the P&S Act can be found here: https://www.ams.usda.gov/​services/​enforcement/​psd/​reporting-violations (last accessed 11/13/2023).

41.   See https://www.ams.usda.gov/​services/​auditing/​process-verified-programs .

42.  Section 208 requires all poultry production contracts to include a “required disclosure” that “additional large capital investments may be required of the poultry grower or swine production contract grower during the term of the poultry growing arrangement or swine production contract.” 7 U.S.C. 197a(b)(1) .

43.  Wayne-Sanderson DOJ Consent Decree, June 25, 2022, available at https://www.justice.gov/​opa/​pr/​justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy .

44.  Additional information on reporting violations of the P&S Act can be found here: https://www.ams.usda.gov/​services/​enforcement/​psd/​reporting-violations (last accessed 11/13/2023).

45.  Responses and costs related to § 201.110(b)(1)(iv), “Communication and cooperation,” are discussed below separately from the other paragraphs of § 201.110. Costs associated with § 201.110(b)(3), “Record retention,” are included in cost estimates for § 201.110(b)(1) and (2).

46.  All live poultry dealers are required to annually file PSD form 3002 “Annual Report of Live Poultry Dealers,” OMB control number 0581-0308. The Annual Report form is available to the public at https://www.ams.usda.gov/​sites/​default/​files/​media/​PSP3002.pdf .

47.  Estimates are available at U.S. Bureau of Labor Statistics. Occupational Employment and Wage Statistics, available at https://www.bls.gov/​oes/​special-requests/​oesm22all.zip (accessed 7/14/2023). Featured OES Searchable Databases: U.S. Bureau of Labor Statistics ( bls.gov ) (accessed July 2023).

48.  USDA-NASS. Poultry—Production and Value 2022 Summary (April 2023).

49.  The Small Business Administration (SBA) defines small businesses by their North American Industry Classification System Codes (NAICS). Live poultry dealers, NAICS 311615, are considered small businesses by SBA if they have fewer than 1,250 employees ( 13 CFR 121.201 ).

50.  All contracts that AMS has previously reviewed include provisions for a minimum grower payment that is greater than zero.

51.  The preamble section II of this rulemaking documents decades of grower comments to USDA that highlight concerns of persistent unfairness resulting from unfair comparisons in broiler grower tournaments.

52.  AMS sought feedback on proposed rulemaking in a 2022 ANPR. Some commenters noted that LPDs often supply insufficient information with respect to requested or required upgrades and deceptively induce growers to make costly ACIs. One commenter, for example, asserted that LPDs demand costly upgrades that some growers have reported to be arbitrary and apparently untethered to any reasonable assurance of increased compensation.

53.  The Small Business Administration (SBA) defines small businesses by their North American Industry Classification System Codes (NAICS). Live poultry dealers, NAICS 311615, are considered small businesses by SBA if they have fewer than 1,250 employees.

54.  Section 201.110(b)(1)(iv) would require LPDs to include written processes related to communication, cooperation, and dispute resolution with growers and § 201.110(b)(2) would require LPDs to conduct regular compliance reviews.

55.  All live poultry dealers are required to annually file PSD form 3002 “Annual Report of Live Poultry Dealers,” OMB control number 0581-0308. The annual report form is available to public at https://www.ams.usda.gov/​sites/​default/​files/​media/​PSP3002.pdf .

56.  Unless otherwise noted, estimated cost or hours estimates for small and large live poultry dealers are the same.

57.  See U.S. Bureau of Labor Statistics, May 2022 National Occupational Employment and Wage Estimates, May 2022. https://www.bls.gov/​oes/​special.requests/​oesm22all.zip .

58.  Small live poultry dealers are estimated to require 50% as many legal hours as large live poultry dealers on a per company basis for one-time cost of developing § 201.106 one-time changes to grower contracts and payment systems.

59.  18,048 legal hours × $147.19 per hour + 59,400 management hours × $86.83 per hour + 7,520 administrative hours × $44.51 per hour + 7,520 information technology hours × $93.68 per hour = $8,853,556.

60.  Average hourly wage rates used to estimate dealer costs include a 41.79% markup for benefits and are as follows: Management—$86.83, Legal—$147.19, Administrative—$44.51, and Information Technology—$93.68. Hourly wage rates were established using the following BLS classifications for each labor category as follows (NAICS Code—OCC code—OCC Title): Management (3116—11-1020—General and Operations Managers) for live poultry dealers' managers, Legal (3110—23-1011—Lawyers) for attorneys for live poultry dealers and for growers, Administrative (3116—43-6011—Executive Secretaries and Executive Administrative Assistants) for live poultry dealers' administrative assistants, and Information Technology (3116—11-3020—Computer and Information Systems Managers) for information technology managers.

61.  The average hourly wage rate of $65.35 per hour used to estimate costs for a poultry grower includes a 41.79% markup for benefits. The wage rate was established using BLS classification (1152—11-0000—Management Occupations).

62.  4 hours to review each disclosure × $65.35 per hour × 19,808 contracts = $5,177,811.

63.  4,256 legal hours × $147.19 per hour + 29,000 management hours × $86.83 per hour + 1,504 administrative hours × $44.51 per hour + 1,504 information technology hours × $93.68 per hour = $3,352,348.

64.  Small live poultry dealers are estimated to require 33% as many legal hours and 133% as many management hours as large live poultry dealers on a per-complex basis for one-time cost of developing § 201.110 tournament fairness policies and procedures.

65.  Small live poultry dealers are estimated to require 50% as many legal hours as large live poultry dealers on a per-complex basis in ongoing compliance and maintenance of § 201.110 tournament fairness policies and procedures.

66.  1,440 legal hours × $147.19 per hour + 28,952 management hours × $86.83 per hour + 752 administrative hours × $44.51 per hour + 752 information technology hours × $93.68 per hour = $2,829,775.

67.  Small live poultry dealers are estimated to require 50% as many legal hours and 125% as many management hours, and 50% as many information technology hours as large live poultry dealers on a per company basis for one-time cost of developing § 201.110 communication, cooperation, and dispute resolution policies and procedures.

68.  848 legal hours × $147.19 per hour + 544 management hours × $86.83 per hour + 168 administrative hours × $44.51 per hour + 340 information technology hours × $93.68 per hour = $211,382.

69.  336 legal hours × $147.19 per hour + 168 management hours × $86.83 per hour + 84 administrative hours × $44.51 per hour + 84 information technology hours × $93.68 per hour = $75,651.

70.  2,256 legal hours × $147.19 per hour + 15,040 management hours × $86.83 per hour + 752 administrative hours × $44.51 per hour + 2,444 information technology hours × $93.68 per hour = $1,900,409.

71.  752 legal hours × $147.19 per hour + 7,520 management hours × $86.83 per hour + 376 administrative hours × $44.51 per hour + 940 information technology hours × $93.68 per hour = $868,443.

72.  75 legal hours × $147.19 per hour + 376 management hours × $86.83 per hour + 75 administrative hours × $44.51 per hour = $47,064.

73.  Live poultry dealers reported a combined total of 19,808 contracts for their fiscal year 2021.

74.  4 hours to review each disclosure × $65.35 per hour × 19,808 contracts × 5 percent of growers that require significant housing upgrades = $258,891.

75.  USDA-NASS. Poultry—Production and Value 2022 Summary (April 2023).

76.  4 hours to review each disclosure × $65.35 per hour × 18,858 contracts = $4,929,481.

77.  1,376 legal hours × $147.19 per hour + 26,488 management hours × $86.83 per hour + 688 administrative hours × $44.51 per hour + 688 information technology hours × $93.68 per hour = $2,597,561.

78.  528 legal hours × $147.19 per hour + 264 management hours × $86.83 per hour + 88 administrative hours × $44.51 per hour + 220 information technology hours × $93.68 per hour = $125,166.

79.  176 legal hours × $147.19 per hour + 88 management hours × $86.83 per hour + 44 administrative hours × $44.51 per hour + 44 information technology hours × $93.68 per hour = $39,626.

80.  2,064 legal hours × $147.19 per hour + 13,760 management hours × $86.83 per hour + 688 administrative hours × $44.51 per hour + 2,236 information technology hours × $93.68 per hour = $1,738,672.

81.  688 legal hours × $147.19 per hour + 6,880 management hours × $86.83 per hour + 344 administrative hours × $44.51 per hour + 860 information technology hours × $93.68 per hour = $794,533.

82.  69 legal hours × $147.19 per hour + 344 management hours × $86.83 per hour + 69 administrative hours × $44.51 per hour = $43,058.

83.  Live poultry dealers that exceed SBA classification criteria for small businesses reported a combined 18,858 poultry contracts in their Annual Reports to AMS.

84.  4 hours to review each disclosure × $65.35 per hour × 18,858 contracts × 5 percent of growers that require significant housing upgrades = $246,474.

85.  4,256 legal hours × $147.19 per hour + 29,000 management hours × $86.83 per hour + 1,504 administrative hours × $44.51 per hour + 1,504 information technology hours × $93.68 per hour = $3,352,348.

86.  Small live poultry dealers are estimated to require 33% as many legal hours and 125% as many management hours as large live poultry dealers on a per-complex basis for one-time cost of developing § 201.110 tournament fairness policies and procedures.

87.  Small live poultry dealers are estimated to require 50% as many legal hours as large live poultry dealers on a per-complex basis in ongoing compliance and maintenance of § 201.110 tournament fairness policies and procedures.

88.  1,440 legal hours × $147.19 per hour + 28,952 management hours × $86.83 per hour + 752 administrative hours × $44.51 per hour + 752 information technology hours × $93.68 per hour = $2,829,775.

89.  PSD form 3002 “Annual Report of Live Poultry Dealers,” OMB control number 0581-0308. Op. Cit.

90.  U.S. Small Business Administration. Table of Small Business Size Standards Matched to North American Industry Classification System Codes. effective March 17, 2023. https://www.sba.gov/​sites/​sbagov/​files/​2023-06/​Table%20of%20Size%20Standards_​Effective%20March%2017%2C%202023%20%282%29.pdf .

91.  USDA, NASS. 2022 Census of Agriculture: United States Summary and State Data. Volume1, Part 51. Issued February 2024 p. 51. https://www.nass.usda.gov/​Publications/​AgCensus/​2022/​Full_​Report/​Volume_​1,_​Chapter_​1_​US/​usv1.pdf .

92.  See U.S. Bureau of Labor Statistics, May 2022 National Occupational Employment and Wage Estimates, May 2022. https://www.bls.gov/​oes/​special.requests/​oesm22all.zip .

93.  1,536 legal hours × $147.19 per hour + 2,640 management hours × $86.83 per hour + 640 administrative hours × $44.51 per hour + 640 information technology hours × $93.68 per hour = $543,757.

94.  Please note throughout the document that components may not sum exactly to aggregate amounts due to rounding.

95.  640 legal hours × $147.19 per hour + 4,760 management hours × $86.83 per hour + 272 administrative hours × $44.51 per hour + 456 information technology hours × $93.68 per hour = $562,339.

96.  288 legal hours × $147.19 per hour + 3,184 management hours × $86.83 per hour + 136 administrative hours × $44.51 per hour + 184 information technology hours × $93.68 per hour = $342,149.

97.  Based on information provided by subject matter experts, AMS estimates that capital upgrades would be required at 5% of complexes each year, triggering creation of a new disclosure document for approximately 5% of growers annually.

98.  6 legal hours × $147.19 per hour + 32 management hours × $86.83 per hour + 6 administrative hours × $44.51 per hour = $4,005.

99.  AMS expects that recordkeeping costs will be correlated with the size of the firms. AMS ranked live poultry dealers by size and grouped them into quartiles.

100.  The first-year cost per small live poultry dealer of $43,000 divided by the average net sales for all small live poultry dealers of $77 million is equal to 0.056 percent.

[ FR Doc. 2024-12415 Filed 6-7-24; 8:45 am]

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Business Plan

Comprehensive Business Plan on Poultry Farming in Nigeria

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EXECUTIVE SUMMARY OF POULTRY BUSINESS PLAN

Poultry farming is one of the most famous businesses in Nigeria today. There are several reasons why this is so. Firstly, it is very easy to start up and it does not require as much capital outlay as most other businesses, except of course you are starting on a large. The business also has a very fast turnover rate, meaning the farmer can make his/her profit in quick succession as long as the farm is run efficiently.

Also Read: Poultry Farming Business Plan & Feasibility Study in Nigeria

The population of Lagos State, where we propose to site our poultry farm, is over 10 million individuals and it is growing on a daily basis. The estimate figure for the number of people that come into Lagos every day is 2000 individuals. When comparing this figure to the number of poultry farms in Lagos State you can see that the demand is way higher than the supply. Lagosians do not have all the eggs that they need, in fact, poultry farms from nearby Ogun and Oyo States have to bring in their farm produce which does not still satisfy the ever-increasing demand. There are also restaurants, hotels, eateries, food production companies, confectionary companies, etc. being established daily in Lagos. This means there is no way presently to solve the problem of egg production and distribution in Lagos except new farms are set up within the State.

We have identified the large population and ever-increasing demand as the problem. OEA Limited is poised to solve these problems by starting a poultry farm in Lagos State, very close to the Lekki-Epe Expressway. This farm will be focused on egg production and the sole aim is to meet the egg-demand of Lagosians. With 5000 birds on our farm we can conveniently supply the whole of Lekki to Epe axis of Lagos and grow to other parts of the State as the business expands. We believe that by infusing our eggs into the market at cheaper rates we can comfortably make the market dance to our tune. The business is expected to breakeven between the second and third years of operation ceteris paribus.

SECTION 2 – INTRODUCTION

To be involved in poultry farming, one must have a passion for the business and a heart of empathy towards animals. You cannot afford to be non-challant with the birds, they are very fragile and their death could crash the business altogether. Agriculture is gradually growing to become the mainstay of the Nigerian economy and how much one invests will determine how much profit will be made.

People will always be in search of what to eat as food is one of the basic needs of man. Poultry is one way of satisfying this need so you can be sure the business will always be lucrative. There are several reasons why one should invest in poultry farming. A few will be enumerated in the next few paragraphs as this is key to understanding the poultry business.

PROFITABILITY OF THE POULTRY BUSINESS

In all sincerity, there are million and one reasons why one must invest in poultry business. It is a highly profitable business venture attracting millions of naira in revenue on a yearly basis. Out of the many reasons for investing in poultry business, we shall discuss a few below.

• People must eat . Man cannot survive long without food and even if one continually eats, it is imperative that balanced diet must be consumed. Even if the economy of any country is experiencing a downtime, people will always find a way to eat food. Poultry is the rearing of birds for meat or eggs, which means it is a means to meet man’s food problems.
• The population of the country . Nigeria has an estimated population of about 180 million which is expected to get to 250 million by the year 2050. An increase in population will result in a commensurate increase in the consumption of food, including poultry products. Take a quick survey with the aim of checking out how many eggs people consume daily or how often people take meat weekly. Try taking the same survey six months later, you should notice a considerable increase in the amount of these products that are being consumed.
• Poultry products serve as raw materials for other industries . Asides being juts eaten as food, products from poultries are used in other industries, here are a few examples. The eggs are used in baking cakes, bread, and several other confectionary products. From the large industries to the roadside baker, they will be in need of eggs. Another example is the use of poultry meat and eggs in restaurants and eateries all over the country. Some of these restaurants need to restock on a daily basis. Imagine you have just one of such restaurants or hotels on your list of clients. Do you know how much would be made on a daily basis?
• Nigerians love to party . Every weekend, in fact, almost every day of the week there is one party or the other. None of these parties can hold without the use of poultry products. You can always avail yourself the opportunity of being a supplier to the event planners organizing these parties.
• There is a greater demand for white meat now more than ever . People do not just eat anything they see like in the olden days. People have become more cautious and health experts have warned against the frequent consumption of red meat. This has shifted the focus of most Nigerians, especially those above 40 years, to seek white meat. One of the best and cheapest sources of white meat is poultry. This is a major factor that has caused the demand for poultry products to skyrocket.

TYPES OF POULTRY FARM

There are different kinds of poultry farms usually dependent on the kind of birds being raised and the purpose why the birds are raised. We will view both classes briefly:

• Type of poultry farm based on the kind of birds raised .

Regardless of the purpose of running a poultry farm, you need birds to run your farm. The kind of birds you raise will determine to a large extent the kind of poultry you run. The types include:

• Chicken poultry
• Duck poultry
• Geese poultry
• Quail poultry
• Turkey poultry
• Guinea fowl, etc.
• Type of poultry based on reason why the birds are raised .

This class focuses on the product that will be the main source of revenue for the poultry farm. There are two broad types and they are:

• Egg production . This type focuses on the production of eggs for human consumption. The birds used in this type of farm are known as layers. It usually takes a while for the birds to start laying but when they do the business blossoms into a huge profit-making system.
• Meat production . This type of poultry focuses on the production of meat for human production. The birds used here are known as broilers and the business if managed well has a very quick turnover rate. In chickens, it is usually between six to eight weeks.

There are a few farms that mix both together. To do this you must have substantial amount of capital and the ability to multitask. There are several other ways to be involved in the poultry business which include:

• Running a hatchery
• Feed production
• Processing and packaging of poultry products
• Manufacture and sale of poultry equipment
• Marketing of poultry products
• Consultancy services

Poultry business is very wide so it requires an entrepreneur to focus on one or two aspects and become a specialist before jumping to the others. To diversify in the poultry business you need to have a huge amount of capital. Mind you the amount of time and capital you put in will determine to a large extent how much you will gain at the end of the day.

PROBLEM STATEMENT

OUR PROPOSAL

We have identified the large population and ever-increasing demand as the problem. OEA Limited is poised to solve these problems by starting a poultry farm in Lagos State, very close to the Lekki-Epe Expressway. This farm will be focused on egg production and the sole aim is to meet the egg-demand of Lagosians. With 5000 birds on our farm we can conveniently supply the whole of Lekki to Epe axis of Lagos and grow to other parts of the State as the business expands. We believe that by infusing our eggs into the market at cheaper rates we can comfortably make the market dance to our tune.

Get your sample Poultry Farming Business Plan in Nigeria today. To order the business plan, pay N10, 000 to:

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